Via an SEC filing Wednesday afternoon, McClatchy disclosed it is negotiating with lenders to refinance its 2011 debt maturities by taking on about $875 million in refinancing debt to pay down amounts under its credit agreement, and extend maturities out another two years. Click here to see the disclosure.
Not sure this means anything in the short term, since this filing deals with 2011 debt.
Update: Best explanation I've heard: McClatchy realizes things will get much worse in 2010, which means the banks would be less likely to refinance then. Time to move now.
In finance 2011 debt is short term. They realize that they cannot cover it so their only hope is that the banks are stupid enough to string it out a couple of more years in hopes of a higher return.
The problem is, at the current rate of declining revenues, the bank analysts are going to be very hard pressed to give them a favorable outlook and recommend such a deal.
They would probably be much better off bleeding the company for every bit of their cash over the next year or so, scrap the carcass and write down the loss against future earnings, hence extracting the remainder from their taxes.
If the banks do go for it. Look for Carlos Slim sized interest rates, maybe even higher.
Right, more risk, higher interest rate and more debt to pay off. They're banking on turning the ship around over a longer period of time. No quick fix for McClatchy. Tough times are going to be on-going for a few years at best.
4:40PM - You have limited, if any, knowledge of the situation from either side so please stop trying to act like you do.
Before you get nasty and hurl an insult or, even better, challenge me to respond with my rendition of the situation, save yourself the keyboarding by not responding.
You're the one acting like a know-it-all. I am simply calling you out on it.
Anon 4:40 I don’t know if anyone at McClatchy knows of anyone named Carlos...but they will...They will!
5:27... so you are calling him out. Now do some calling. If you can't provide additional information or something that contradicts his statement then you are doing something but you are not calling him out.
I have no idea so I would be interested to hear your take on things.
This is just Pruitt trying to stay a step ahead of the repo man.
5:38PM - Until I get more facts about the situation, I don't really have much to say. As details emerge, I will be glad to offer an educated opinion rather than conjecture. Thank you for asking though.
OK... thanks. Please keep us informed of anything you come up with.
The only reason to do this is because they know they won't have the cash to meet the obligation in 2011. They have to roll it over.
It is better to ask the banks now, more than a year in advance, rather than right before it matures.
5:27 PM Do you know 4:40? Why would you say something so childish as that?
5:38PM - Until I get more facts about the situation, I don't really have much to say.
So you just come in here to troll? You're definitely a former McClathy employee.
No matter which of the various "commenters" is right, the fact that McC is trying to refinance debt is the main problem. They will claim that this is a prudent business action when in reality, they are just borrowing from Peter to Pay Paul. This does not bode well for the future.
Next time you refinance your debt or a balloon payment, I will call you stupid and say, "that is the main problem," and you're just "...borrowing from Peter to pay Paul."
(Responses of, "I have no debt," are fully expected.)
7:13 AM McClatchy has no balloon payment and you are stupid. They are attempting to kite their loans because they can't meet the terms and they know it.
They are not going to get a better rate, they will pay more. Much, much more.
7:24. You, not unlike most here, obviously don't understand finance. You need to read more than this blog about refinancing debt. Whether it's a company or an individual, the premise is the same.
I refinanced my house mortgage to get a better rate and got one. Was that a stupid thing to do?
Some try to refinance and can't, but does that mean its not worth trying?
Anon 7:24 I know, it's tough dealing with a liberal with minimal grasp of finance, let alone corporate finance.
The clear tip off was his simplistic house analogy
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