Magazine article Editor & Publisher

Fitch Cuts Tribune Rating Again -- and Warns More Downgrades Coming

Magazine article Editor & Publisher

Fitch Cuts Tribune Rating Again -- and Warns More Downgrades Coming

Article excerpt

When Tribune Co. announced last month that it was going private in a heavily leveraged deal with Chicago real estate magnate Sam Zell, Fitch Ratings immediately downgraded the media giant's debt rating, and warned more cuts were likely on the way.

Late Thursday, Fitch followed through, reacting to the first step in the Zell transaction by dropping Tribune's IDR (issuer default rating) a notch to B+ from BB-, and again warning of a likely downgrade, to B-, when the deal is completed.

B+ is four notches below an investment-grade rating. The effect will be to make borrowing somewhat more expensive for Tribune.

Fitch said the company remained on a Ratings Watch Negative. If the deal is completed as envisioned, it added that would likely change to a Stable Outlook rating.

The $8.2 billion deal will be financed in stages by some $11 billion in debt that will be channeled through an employee stock options plan (ESOP) that will not be taxed on interest or principal payments. …

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