。
On hearing the bad news, she felt sorry.
Literal
[topic-は] bad news [object-を] heard-and, regrettable [adverbial-に] thought.
残念に思う is a set expression: a な-adjective 残念 (regrettable, unfortunate) plus the adverbial に plus 思う ('think/feel'). Together it means 'feel sorry/regretful (about something).' In Japanese, emotions are often expressed as something one 'thinks' rather than 'feels' — 嬉しく思う ('think gladly'), ありがたく思う ('think gratefully'). The te-form 聞いて links cause and effect: 'heard the news, and as a result, felt sorry.' The ~ました ending keeps the register polite, suitable for narrating in a workplace or formal context.