Friday, February 6, 2009

S&P cuts McClatchy's rating deeper into junk territory

More bad news for McClatchy, as Standard & Poors said Friday it cut its rating on McClatchy to "CCC-plus" -- considered a junk grade.
Standard & Poor's on Friday cut its ratings on McClatchy Co (MNI.N) deeper into junk territory and to an extremely speculative grade and said the company is likely to violate terms in its debt agreements at the end of 2009.

S&P cut the newspaper publisher two notches to "CCC-plus," seven steps below investment grade, from "B." The outlook is negative, indicating a further downgrade may be likely over the next one to two years.

"The rating actions reflect our belief that McClatchy is likely to violate the total leverage covenant in its credit facilities at the end of 2009," S&P said in a statement.

"This is due to our view that total revenue could decline near 20 percent and earnings before interest, taxes, depreciation and amortization (EBITDA) could fall between 35 percent and 40 percent this year," S&P said.

When a company violates its debt covenants it is forced to renegotiate its agreement with bank lenders, which may choose to withdraw funding.

"Given our expectation for revenue and EBITDA declines in 2009, we believe McClatchy is likely to violate its 7 times total leverage covenant in the December 2009 quarter, and we are uncertain at this time that lenders would grant additional temporary relief," S&P said.

Leverage is a measure of debt relative to EBITDA.

"Even if lenders do grant relief, we would be concerned that potential leverage of 7 times or more at McClatchy would not be manageable over the long term given secular trends in the newspaper industry," S&P added. "As a result, we believe it is likely that debt at McClatchy would undergo a restructuring of some form."
Fitz and Jen have more: S&P Sees McClatchy Cruising Towards Default


Anonymous said...

Yep, Pruitt is leading MNI into bankruptcy. I once felt the family would step in to prevent that by dumping Pruitt. Now it is clear they are complicit.

Anonymous said...

DOW Jones News Ticker: (Exchange Floor)

Standard & Poor's Ratings Services pushed its rating on ailing newspaper publisher McClatchy Inc. (MNI) to highly speculative territory amid concerns the company may violate debt covenants by year's end.

Anonymous said...

Junk-just like their papers! Ha!

Anonymous said...

Wall Street Journal - S&P Downgrades McClatchy To Highly Speculative Territory

Man, this is going out all over the place.

Anonymous said...

So,what was this about?

Pat Talamantes said:

...So, going forward, we do not have any meaningful maturities until June of 2011. June of 2011 in this market is a long way away. So, compared to other companies that are out there dealing with maturities in 2009, we are feeling pretty good about that, and we are working hard as we can to see if we can not reduce the amount that matures in 2011.

Anonymous said...

Honestly, if Pruitt did get fired, would anyone want to be CEO of MNI now that it is doomed?

Anonymous said...

Pruitt gets an A for doublespeak!

Anonymous said...

1:17 So is Pat right that they don't have to worry until 2011? If he is correct then What's with the Standard & Poor's.

Anonymous said...

Anon 1:34 PM, who could know what all this means?

One says forgetaboutit, the other says, you are too damn shaky. I wonder if the guys that break kneecaps for not paying up, are in the wings somewhere?

Anonymous said...

@Fitz & Jen

“The McClatchy’s Co. revenue and EBITDA are falling so fast that it will violate its loan agreement -- even with its new looser covenants.”

Looser covenants, another new phrase. This is like learning a whole new language. I definitely need an interpreter.

Anonymous said...

Pruitt has ‘elegant’ takes-- That’s what they are calling mismanagement now?

“McClatchy CEO Gary Pruitt has a knack for elegant takes on high-concept, long-term newspaper industry issues.”

Anonymous said...

So is Pat right that they don't have to worry until 2011? If he is correct then What's with the Standard & Poor's

No, actually Pat is full of crap and lying through his teeth, basing his drivel on the assumption that they will not violate the covenants of their credit terms. Unfortunately for him and his big mouth, the announcement by S&P AND Fitch betrays his shtick.

S&P's and Fitch's credit ratings are generally the key factors in a company's debt covenants and by being placed on Negative watch indicates that they are expecting to lower further. To do so, can and probably will send them into violation ending all bets on their sweetheart renegotiations deal that the banks have figured out by now that they got screwed.
If McClatchy were to violate those term you can rest assured that the creditors at this point would force liquidation as the sum of the parts is now worth more than the whole.