Fitch Ratings said Thursday it has downgraded the issuer default rating of newspaper publisher McClatchy Co. to "C" from "CCC."
Both ratings are non-investment grade, also known as "junk." A "C" rating is just one notch above default. Fitch also downgraded the company's senior secured credit facility and senior secured term loan to "C/RR4" from "CCC/RR4."
The ratings changes come in the heels of McClatchy's offer to buy back $1.15 billion in debt at a steep discount, under the assumption that its unsecured lenders will accept a fraction of the amount they are owed rather than risk getting even less if the company were to seek bankruptcy protection.
The company is offering to pay $60 million in cash and issue $175 million in new notes to replace $1.15 billion in debt.
The ratings agency said that when it downgraded McClatchy to "CCC" in February, it was "particularly concerned about the potential for a coercive debt exchange offer that would represent a material reduction in terms for unsecured bond holders."
Thursday's announcement, Fitch said, would constitute a restricted default under the ratings agency's coercive debt exchange criteria.
This is because the "deeply below-par offer and partial maturity extension represent a material reduction in terms," Fitch said.
In addition, Fitch said it "views the offer as coercive, because old bondholders that do not participate in the exchange risk being further subordinated to the proposed $175 million of new notes.
Fitch also said it sees "exceptionally high levels of credit risk and a real threat of bankruptcy" for the company.
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Thursday, May 21, 2009
Seeing bankruptcy threat, Fitch downgrades McClatchy deeper into junk status
Citing what it called "a real threat of bankruptcy", Fitch downgraded McClatchy to "C" -- just one notch above a default rating.
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14 comments:
Now it is just a question of exactly who is going to be stupid enough to throw good money after bad.
I've seen sucker bets before, but this is right up there on the creative shake down list of all time greats. Right next to the 419 scam.
Buh Bye.
“McClatchy deeper into junk status” reminds me of the song:
♫ Limbo Rock ♫
Limbo lower now-
Limbo lower now-
How low can you go?
---
Then you end up with your ass on the floor.
...The Culls at McClatchy were morally and ethically bankrupt long before they started sliding into junk bond status.
..but Gary said we were fine......
I am not that bright when it comes to high finance, but why would anyone accept these new senior bonds? Why couldn't MNI do the same thing in a year and issue senior-senior bonds, and wipe out these new senior holders, just as they are suggesting they want to wipe out the existing bond holders? If I were an existing bond holder, I think i would prefer to force the company into bankruptcy court if only to ensure my position is not eroded further.
I am not that bright when it comes to high finance, but why would anyone accept these new senior bonds?
There is no logical reason anyone would accept this. It is desperate attempt to stave off bankruptcy and remain in control of the company buy using the fear of getting less under court management.
After bondholders do the math and figure out that they are being extorted for 18 cents on the dollar, they will realize that their best interest, and the interest of those who follow will be better served by ousting this management under Chapter 11 and if necessary liquidation.
McClatchy's management from the board of directors on down can be cut by over 80% without anything resembling the devastation caused by laying off the rank and file at a savings of equal to or greater than what they saved on staff cuts. The DC bureau is a money sink that serves no purpose at all beyond it's propaganda benefits.
There is a ton of benefit that can be had by bankruptcy and with the help of the courts a return of better than 18 cents on the dollar is the best bet.
"Thursday's announcement, Fitch said, would constitute a restricted default under the ratings agency's coercive debt exchange criteria."
This is the key statement. MNI has acknowledged that they cannot meet their obligations.
This is the very tact that GM attempted to take but were rebuffed.
@7:43
Actually it's the "tack" GM attempted to take. The sailing term "tack" means to change directions.
This is meant as a friendly clarification. Why continue to get it wrong if someone is willing to share the proper usage?
This is meant as a friendly clarification. Why continue to get it wrong if someone is willing to share the proper usage?
Why thank you, however you should know that nautical terms are not on the tip of the financial analysts' repertoire.
Tact: a keen sense of what to say or do to avoid giving offense; skill in dealing with difficult or delicate situations.
In this case the use of obscure legalize to cover the actual intent and ramifications of their, "offering"
The move is a technical default and acknowledgment that the company cannot continue operations under the current structure. Instead of admitting it, they covered the situation with a thinly veiled threat combined with an attempt to extort money from current bondholders, under the guise of a legitimate proposal.
There they go again, robbing Peter to pay Paul!!
11:01 AM
I understood 7:43 perfectly without your unneeded remark. You must be an old guy. The new media doesn’t need the red pencil people any longer. Posting comments is for the quick sharing of opinions, don’t try to bog us down in needless bullshit. That is what the old media has become, useless, stale, BS.
@12:27 they just likely wanted to point out something trivial that often gets "reported" on MW to begin with due to "poor editing" as they claim.
And, apparently this is working, as they (the bond holders) agreed to do it, whereas GM/Chrylsers refused.
So that would mean that at least some note holders think that McClatchy has value.
~byon~
And, apparently this is working, as they (the bond holders) agreed to do it, whereas GM/Chrylsers refused.
I am not quite sure what drug you are on, but where did you get the fool impression that the bond holders agreed to do it?
The bond holders have not agreed to it in any way shape or form. How on earth did you come to that conclusion?
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