Reaffirming its belief that The McClatchy Co. has "an untenable capital structure" of large debt and shrinking revenue, Fitch Ratings on Friday downgraded the credit rating of the nation's third-largest chain, and noted pointedly that other debt-encumbered newspaper companies are now in bankruptcy protection.
The action came hours after McClatchy announced that its offer to exchange $1.15 billion of its approximately $2 billion debt for new and deeply discounted notes with higher interest rates had fallen far short of its goal.
Fitch dropped its "issuer default rating" from C, which indicates an imminent or inevitable default, to RD, indicating a default on some but not all of McClatchy's debt. In late May when McClatchy announced the debt swap, Fitch and other big credit rating agencies declared that it was a "coerced debt exchange" that punished noteholders by trying to force them to accept less than the full value of their notes.
Update: In comments, a reader says the RD rating was issued by Fitch in May, and they restored the C rating today. A summary of Fitch's actions here is very confusing -- and could be interpreted the way the commenter did. But the analysis by respected E&P senior editor Mark Fitzgerald (excerpted above) says MNI was downgraded to "RD" today.
Hat tip: email