UPDATE 3-McClatchy to slash 1,600 jobs, cut executives' pay

* To cut 1,600 jobs or 15 pct workforce starting end Q1

* Expects $30 mln in severance costs

* CEO, executive officers to take 10-15 pct pay cut

* Shares fall as much as 35 pct to 44 cents (Adds analyst comment, CEO base salary, shares and CDS)

By Robert MacMillan

NEW YORK, March 9 (Reuters) - McClatchy Co (MNI.N) will slash 1,600 jobs, or about 15 percent of its workforce, and dock the pay of its top executives, in one of the more dramatic cuts by a U.S. newspaper publisher as it struggles with plunging advertising sales.

The news drove McClatchy shares down as much as 35 percent in Monday morning trading to 44 cents a share, after having lost 95 percent of their value over the last 12 months.

Investors trading insurance on the company's debt raised the cost of that insurance, indicating they think it's at high risk of default.

"There's this general feeling that the ice on which they've been skating has been getting thinner and thinner," said Benchmark Co analyst Ed Atorino.

The publisher of 30 daily newspapers, including The Miami Herald, Sacramento Bee and Anchorage Daily News, has about 10,800 full-time-equivalent positions. It has been reducing costs to meet heavy debt payments from its purchase of newspaper chain Knight Ridder Inc in 2006.

Standard & Poor's said in February that McClatchy likely would violate the terms of its debt agreements at the end of 2009. Fitch and S&P said they think McClatchy might seek a distressed debt exchange to avoid breaking those terms.

"We previously discussed a plan to reach a targeted level of cost savings, but given the worsening economy, we must do more," Chief Executive Gary Pruitt said in a statement on Monday. "I'm sorry we have to take these actions, but we believe they are necessary."

The company will reduce Pruitt's $1.1 million base salary by 15 percent, and cut other executive salaries by 10 percent.

McClatchy declined to give an estimate for how much money it expects to save from these moves.

The Sacramento, California-based publisher warned in a regulatory filing last Tuesday that it may broaden its previously announced savings plan because of the worsening outlook for advertising revenue. Shares of McClatchy fell to a new low of 35 cents that day.

McClatchy expects to incur $30 million of severance costs from the latest cuts. It will cut jobs through layoffs, leaving open job positions unfilled, consolidation of job functions and outsourcing. The cuts would affect nearly every area of the company, it said.