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Fitch Downgrades McClatchy Debt Deeper into Junk on Revenue Concerns

Magazine article Editor & Publisher

Fitch Downgrades McClatchy Debt Deeper into Junk on Revenue Concerns

Article excerpt

After markets closed Thursday, Fitch Ratings downgraded The McClatchy Co.'s Issuer Default Rating (IDR) deeper into junk territory on concerns its top-line revenue and cash flow will continue to decline.

Fitch downgraded McClatchy's IDR to "B+" from BB. A "B" rating means Fitch believes McClatchy bonds are "highly speculative," with a "limited margin of safety" remaining.

Fitch also downgraded McClatchy's senior unsecured notes and debentures to "B/RR5" from 'BB," suggesting that the recovery rates under a "distressed scenario" such as default would be 11% to 30%.

Fitch said its outlook on McClatchy "negative," suggesting further downgrades are possible.

McClatchy's debt amounts to about $2.1 billion.

In his note, analyst Mike Simonton said the downgrade and negative outlook "reflect the continued top-line revenue pressure and resulting decline in EBITDA (earnings before interest, taxes, depreciation, and amortization).

Thursday, McClatchy reported its second-quarter advertising revenue was off16.8% from the year-ago quarter on a plunge in classified advertising that included a 39% decrease in revenue from real estate classified and a 37% drop in from the housing category. …

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