An agreement between McClatchy Co. and its banks puts the country’s third-largest newspaper chain at risk of defaulting on its debt by the end of the year, according to credit analysts. If that happens, Bank of America and other creditors could either show leniency and rework the terms of their agreement or push the publisher of 30 daily newspapers, including the Miami Herald and Sacramento Bee, into bankruptcy.
In the current environment, banks are less likely to sustain companies on life support, said Shelly Lombard, an analyst at Gimme Credit. She pointed to the example of Idearc ( IAR - news - people ), a Yellow Pages publisher, which breached debt agreements and filed for bankruptcy in March. “Banks are starting to pull the plug on companies,” she said. “It used to be that banks worked with the clients because they were better alive than dead. Some of them may not be worth it.”
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