Magazine article Editor & Publisher

S&P Predicts McClatchy Loan Default by Year's End

Magazine article Editor & Publisher

S&P Predicts McClatchy Loan Default by Year's End

Article excerpt

Standard & Poor's Ratings Services downgraded The McClatchy Co.'s credit ratings Friday, and warned that it could default on its loan agreements by the end of the year.

Last September, McClatchy won agreement from its lenders to loosen its so-called leverage covenants, allowing it to carry more debt relative to its income. Under terms of the agreement, McClatchy could be forced to repay all its loans immediately if the leverage covenants are breached. The new agreement also pledges essentially all McClatchy newspapers and other assets as security.

But S&P credit analyst Emile Courtney said even with the looser loan terms, McClatchy will have a hard time servicing the loan by the end of the year.

"The rating actions reflect our belief that McClatchy is likely to violate the total leverage covenant in its credit facilities at the end of 2009," Courtney said. "This is due to our view that total revenue could decline near 20% and EBITDA (earnings before interest, taxes, depreciation and amortization) could fall between 35% and 40% this year."

S&P said it is skeptical that McClatchy's lenders will be amenable to renegotiating terms yet again -- which could lead to, in its words, "a restructuring of some form. …

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