The McClatchy Company, one of the nation's largest newspaper publishers, has filed for bankruptcy protection. Based in Sacramento, Calif., the Chapter 11 filing on Feb. 13 was made in order for the company to keep its 30 newspapers afloat while it reorganizes more than $700 million USD in debt, 60 percent of which would be eliminated.
The bankruptcy is yet another in a long line of examples of public company failure being caught by our proprietary FRISK® score. In fact, all the way back in 2017, our FRISK® score was predicting increased risk, which we talked about in our McClatchy Company High Risk Report. As the years rolled by and their FRISK® score remained anchored to a "1," we continued to warn our subscribers to make whatever business pivots were necessary to avoid unnecessary exposure to a potential bankruptcy.
This Bankruptcy Case Study will give a postmortem on what finally doomed The McClatchy Company after an extended struggle to stay alive. McClatchy’s filing foreshadows further cost-cutting and retrenchment for one of the biggest players in local journalism, at a time when American newsrooms are straining to cover their communities amid declining ad revenue and dwindling resources. In fact, 20% of all U.S. newspapers have closed since 2004, and the sector has shed nearly 50% of its jobs.
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Our FRISK® score model incorporates four powerful risk inputs:
- “Merton”-type model of stock market capitalization and volatility
- Financial ratios, including those used in the Altman Z”-Score Model
- Bond agency ratings from Fitch, Moody's, and DBRS Morningstar
- Website click pattern data from CreditRiskMonitor® subscribers, representing key credit decision-makers at more than 35% of current Fortune 1000 companies plus thousands of other large companies worldwide
Since the start of 2017, the FRISK® score’s rate of success in capturing public company bankruptcy is 96%. In any given year, you can count on one hand the times we miss – and in those outlier cases, the circumstances deal with unusual, unforeseen events such as natural disasters and CEO fraud.
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About Bankruptcy Case Studies
CreditRiskMonitor® Bankruptcy Case Studies provide post-filing analyses of public company bankruptcies. Our case studies educate subscribers about methods they can apply to assess bankruptcy risk using our proprietary FRISK® score, robust financial database, and timely news alerts.
In nearly every case, a low FRISK® score gave our subscribers early warning of financial distress within a one-year time horizon. Our proprietary FRISK® score predicts bankruptcy risk at public companies with 96% accuracy. The score is formulated by a number of indicators including stock market capitalization and volatility, financial ratios, bond agency ratings from Moody’s, Fitch and DBRS, and crowdsourced behavioral data from a subscriber group that includes 35% of the Fortune 1000 and thousands more worldwide.
Whether you are new to credit analysis or have decades of experience under your belt, CreditRiskMonitor® Bankruptcy Case Studies offer unique insights into the business and financial decline that precedes bankruptcy.