Tuesday, April 14, 2009

Fitch says it is worried about McClatchy's "heightened covenant compliance risk"

Fitch just released its “Media & Entertainment Stats Quarterly” for the fourth quarter of 2008 and the results aren't a surprise to anybody who's been paying attention.
... Fitch rates McClatchy’s unsecured subordinated debt at C, which under its definition is a rating that “signals imminent default.” Even its secured debt and overall issuer default rate are a highly speculative CCC.

There’s nothing particularly new in the Stats Quarterly, but it’s interesting to watch McClatchy’s leverage ratio -- debt compared to EBITDA -- explode from 0.5 times in 2005 to 7.7 times in the Year of the Knight Ridder Acquisition in 2006. It’s back to 5.5 times now, but in a comment Fitch says among its concerns is “heightened covenant compliance risk.”

Fitch also says its worried about McClatchy’s “untenable capital structure which may lead to coercive debt exchanges or outright default.” Coercive debt exchange occurs when a debtor gives creditors the take-it-or-leave-it choice of swapping new debt with a value far below the face value of the old debt.

Still, Fitch awards a “Great Effort!” sticker for “consistent commitment to paying down debt.”

I said last week McClatchy probably won't meet its debt covenants for the current quarter, which will most likely result in another round of layoffs in June.


Anonymous said...

Since MNI is so concerned about Sarah Palin, and senior citizens who have no internet access, then I’m not worried either! (sarc off)

May MNI’s death be lingering and painful

Anonymous said...

@ Fitz & Jen
Fitz has his usual clever remarks about MNI. There is a report card graphic with the grade ‘F’ for McClatchy.
Fitch Q4 ’08 Media Report Card Shows McClatchy Bringing Down The Curve
Fitz: It was bad enough to have to bring your poor report card home to your parents. Imagine if you had to bring all the smart kids’ report cards home as well?

Anonymous said...

maybe now that most of the dead weight is gone things will change.

you conservatives/racists/losers are the problem. when was the last time you former employees (I guess that should read: losers who couldn't keep a job) worked an honest day?

Anonymous said...

5:39 PM
Man, you better put that bottle down, you have scrambled your brains.

Anonymous said...

5:39 PM I take comfort in your words. Just reading your constant flow of tripe assures me that sooner or later someone is going to snatch you firmly by your throat and kick the living dog shit out of you.

Dave D. said...

...My sensors have detected in 5:39 our old friend, The Boneless Wonder ! From zero to soused in 39 minutes, that's a record. Pretty soon the SacBee will be like Servpro...." Like it never even happened ". And The Boneless Wonder will be pestering the other barstool Beeboys with his millionth rendition of the same 5 stories.

Anonymous said...

5:39 PM...It appears that some of the dead weight is still employed -- you're a prime example!

When I was employed with McClatchy I was still hard at work at 5:39 PM going about my business of recording an honest days work...not blogging senseless crap like you.

Why don't you hitch a ride back to Somalia and we'll send some Navy Seals to deal with you next time you decide to open your mouth.

Anonymous said...

Don't worry 5:39, when reality mugs you and takes what is yours, your thoughts will change.

Anonymous said...

yea-what 8:46 said-LMAO--i'even donate my Zodiac to get him there

Anonymous said...

xxx said last week McClatchy probably won't meet its debt covenants for the current quarter, which will most likely result in another round of layoffs in June.xxx
Why is that? If they cannot meet their debt covenants, they will slip into bankruptcy court, IMHO. The bankers see they can make much more from breaking up MNI than they can carrying this company, especially as it is now clear this recession is far from over and so more bleak ad revenue news is coming. Some of these newspapers, especially the Miami Herald, are sitting on valuable property that could easily be turned into revenue, if the bankruptcy courts were allowed to continue. So I see this as a prelude to bankruptcy real soon. That would have the effect of freezing everything for several months until the court found out what is going on, then followed by layoffs late in the year and sell-offs. For MNI employees, that might be good news because the economy might be a little brighter at that point.

Anonymous said...

Actually a breakup of McClatchy might be the best thing for the company as a whole. I'm convinced that our paper (and a number of others that focus on a local interest) could survive all this if we didn't have the McClatchy Albatross swaying about our neck pulling us down.

Anonymous said...

If they cannot meet their debt covenants, they will slip into bankruptcy court, IMHO.

At first glance your solution appears simple, but it is more complicated than that.

Firstly, the creditors do not see breaking the company up as more profitable than not. Violating covenants will actually serve to bring even more of MNI's bottom line into repaying the debt under even more restrictive terms. You also have to remember that breaking up the company means first and foremost that half or more of the individual companies will go under immediately.

The Miami Herald has been taken off the table with their new lease agreement. No one will buy the building now because it would take years to unwind the contract that they signed with their new tenant.

Granted though, breaking up the company would benefit a few of the papers but that will not be the plan. Pruitt et al want to keep control and the Creditors want to keep their money. They will keep them together and bleed them for every penny that they can. In the process there will be nothing left but the shell and liquidation of that when they are done.

What is best for employees, shareholders and subscribers has been off the table for quite some time.

Anonymous said...

8:37 AM
Re: “What is best for employees, shareholders and subscribers has been off the table for quite some time.”

The what is best for ‘subscribers’ seems like the operative word to me. Without readers, there is no need to charge for content, or for advertisers to pay money to reach a nonexistent audience. The current plan seems like MNI is just shadow boxing, IMO.

John Altevogt said...

It is unfortunate that the citizens of a community do not have the standing to fight a corporation when the actions it takes are detrimental to the community. If we could force McClatchey to stop looting The Star (as they are allegedly doing according to the locals), then we would only have one level of incompetency to deal with instead of two.