Moody’s Downgrades McClatchy
September 19, 2008
Declining advertising revenue is behind Moody’s Investors Service’s downgrade of newspaper giant McClatchy’s corporate family and probability of default rating to B2 from Ba3.
The outlook is negative. The rating agency expects a continued decline in ad revenue to continue to pressure McClatchy’s Ebitda and lead to an increase in leverage and an increased risk of a covenant violation.
The ratings agency said that it expects the company’s free cash flow and moderate level of bank leverage will allow it to obtain covenant amendments if needed. Last week the Sacramento, Calif.-based company announced a 10% reduction in its work force and a 50% cut in its dividend, which will decreases pressure on its cash flow.
Newspaper publishers have been hard hit by declining readership and ad revenues, as well as increasing newsprint costs. Moody’s downgraded the company’s senior unsecured bank credit facility to Ba2 from Ba1 and its senior unsecured regular bond debenture to Caa1 from B1.
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