State publisher tries to avoid Chapter 11

Standard & Poor’s on Friday cut its rating on McClatchy Co.  further into junk territory, saying its debt exchange is tantamount to a default because of the newspaper publisher’s distressed financial condition, Reuters reported.

McClatchy, publisher of The State, Charlotte Observer and five other newspapers in the Carolinas, on Thursday proposed exchanging $1.15 billion of outstanding debt for cash and new debt in a bid to stay afloat.

The plan offered some hope that McClatchy will be able to ride out the worst recession since World War II without resorting to Chapter 11 bankruptcy protection – a refuge already sought by at least seven U.S. newspaper publishers since December, according to The Associated Press.

If the exchange is successful, “McClatchy would have greater capacity to weather the current downturn over the next several quarters,” S&P said in a statement.

Still, the investors participating in the exchange will take a “substantial discount” in comparison to the original value of their debt, S&P said.

The move by S&P comes a day after Fitch Ratings and Moody’s Investors Service downgraded McClatchy, saying they considered the exchange offer a default.

S&P cut McClatchy’s rating to CC from CCC-plus. The rating will be cut to SD, or selective default, when the exchange is completed, S&P said.

S&P considers debt exchanges as “distressed” and counts them as defaults when bondholders receive less than the original value of their debt and the company would likely face a conventional default without the exchange, according to Reuters.

McClatchy shares were trading for around 82 cents a share early Friday afternoon. The company’s 52-week high is $9.31.

Breaking news: Trees are good

In one of the more gutsier opinion pieces in recent memory, Greenville News columnist Jeanne Brooks takes a brave stand for … trees.

Her Pulitzer Prize contender, titled “Trees do lots of work,” comes in response to the Bi-Lo Center in Greenville removing 14 oaks trees from its parking lot recently to give folks attending last weekend’s outdoor Crawfish Boil audiences an unobstructed view of a stage.

In prose that would put Hemingway to shame, she takes the Bi-Lo Center to task for their actions by highlighting the unseen good trees do. From her piece:

“What we don’t see is the leaves of trees remove pollutants and particulates from the air.

“That work is invisible to us.

“But also absolutely vital, teetering as we are in the Upstate on the edge of violating the Clean Air Act.

“Particulates are the tiny particles of soot from vehicle exhaust and other sources that you breathe in, and they aggravate your lungs and breathing passages.

“Among other things, breathing particulates can provoke episodes of asthma in some people.

“The tiniest particulates have been linked to heart attacks and other cardiac problems by a number of studies.”

Trees are good for cleaning the air? Who would have thunk it?

Fortunately, we have the sophisticated analysis of Brooks to both illuminate us and berate the Bi-Lo Center for their selfishness.

The only thing missing from her piece was how many humans will ultimately die because Bi-Lo choose to cut down those 14 trees.

Sarcasm aside, columnists are certainly free to write about whatever topic they choose, no matter how inane.

But in this period of declining newspaper readership, publications such as The Greenville News might do well to focus their scribes’ attention on matters of slightly more significance than the fact that “trees do lots of work.”

South Financial settlement questioned

A group of shareholders of The South Financial Group has challenged the proposed settlement of lawsuits between two shareholders, the company, the board of directors and former chief executive Mack Whittle, The Journal Watchdog is reporting.

In a filing May 7 in the Court of Common Pleas in Greenville, the objecting shareholders said they were prevented from being heard in the case because of the lack of timely notice, the publication reported.

“They said the settlement, if approved, would prevent them from ‘bringing an action of a similar nature in the future,’ would negate checks and balances on the board and enrich attorneys at their expense in depleting the value of their shares,” according to The Journal Watchdog.

“They allege that the deal to settle the case ‘is highly suggestive of overcompensation, self-dealing and excessive executive and board benefits, all to the detriment of these stockholders, and all shareholders of the company …'” the publication adds. 

Asking to be heard in objection to the settlement are family members and shareholders who received or inherited stock in TSFG as a consequence of the sale of First National Bank of Pickens County of Easley to TSFG in 1998.They represent more than 800,000 shares, according to The Journal Watchdog.

Representing the most stock from the Easley bank are Richard Jones and his family and James (Jim) and Patricia Grantham of Greenville, it added.

In March, South Financial announced it had reached an agreement in principle to settle suits filed Nov. 7, 2008, by Vernon A. Mercier, and Nov. 26, 2008, by John S. McMullen.

The suits were filed in the weeks after Whittle “stepped down” from South Financial, the company he began in 1986, but not before taking a golden parachute estimated to be worth at least $18 million.

The suits alleged that South Financial’s board “improperly accelerated the retirement of and approved excessive compensation” for Whittle.

Whittle had originally been scheduled to retire by year-end, but that date was moved up to October 27, in order that South Financial might get $347 million in federal bailout money and Whittle would still be able to retain his lucrative buyout. Whittle’s payout would have been in excess of federal guidelines if he’d not left the company before South Financial received the government money.

South Financial lost $569 million in 2008 and saw its stock price fall from $15.67 a share to $4.31 by year end. It closed Thursday at $2.03 a share.

Tort law: common sense need not apply

Overlawyered has a sobering post about the state of tort law in Mississippi. Not surprisingly, it’s anything but pretty:

“19-year-old Sidney Odom happily went along when 20-year-old Travis Kirby and 18-year-old Riley Strickland asked “Who wants to go to the Beacon?”—a bar in Terry, Mississippi. A long night of drinking and driving came to an end at about 3 am when Kirby’s Camaro hit a tree at about 90 mph. As none of the three were wearing seatbelts, all were ejected from the vehicle. Kirby, whose blood-alcohol level was three times the legal limit at 0.25%, died at the scene; the other two were injured.”

The Coyote Blog adds some cogent commentary:

“Think for a moment about who you reasonably believe to be at fault for the accident.  Now, here is who actually was forced to accept liability:

• The dealer who sold them the car
• The shop that installed their tires
• Goodyear tire company

“All you can say is, huh?  When looking at modern tort outcomes, a much better predictor of legally assigned liability than trying to decide who was truly at fault is to look at the net worth of everyone who had any relation to the victims, and assuming those with the highest net worth will end up being held ‘liable.'”

According to Overlawyered, “The car seller settled for about half a million dollars; a Copiah County jury found the other defendants liable for an additional $2.1 million. Goodyear appealed, complaining about various prejudicial statements made by the plaintiffs’ attorneys, such as introducing evidence from other lawsuits about other types of tires, but the Mississippi state appellate court affirmed.”

Somehow, one images that, say, five years from now the plaintiffs will have long since blown through whatever money they received as their part of the settlement (after deducting for attorney’s fees, of course), while the lawyers involved will have long since moved on to other similarly outlandish cases and will be continuing to line their pockets while making a mockery of common sense and responsibility.

(Hat tip: The Coyote Blog)