McClatchy's Miami Herald goes on the block

It has come to this: The newspaper industry is in such bad shape that one of the largest chains will sell its crown jewel. McClatchy (NYSE: MNI), the debt-heavy paper firm, is working on auctioning the Miami Herald. With its revenue falling rapidly, the move may not be enough to save the parent company.

According to The New York Times, "The people briefed on the company's plans say The Herald generates a very slim operating margin and that the most attractive part of any deal could be its prime waterfront real estate." How remarkably sad that a transaction would be one with the primary purpose of selling valuable Florida land.

McClatchy does not have much choice. Its own operating margins are tiny. The firm said its ad revenue dropped 20% in October. In the third quarter, MNI had net income of $4 million on revenue of $451 million. McClatchy has over $2 billion in long-term debt.

There is still an excellent chance that MNI will follow other publicly traded newspaper chains Journal Register and Gatehouse to the point where their shares are delisted from NYSE and they are forced to sell most of their properties to pay off debts.

Selling the Herald does not solve the problem. Newspapers are not going to rebuild their revenue.

Douglas A. McIntyre is an editor at 247wallst.com.