Magazine article Editor & Publisher

Credit Rater Fitch: Thumbs Down on McClatchy Debt Exchange

Magazine article Editor & Publisher

Credit Rater Fitch: Thumbs Down on McClatchy Debt Exchange

Article excerpt

Reacting to The McClatchy Co.'s offer Thursday to exchange $1.15 billion in notes for cash and new notes that have deeply discounted face values but paying high interest, Fitch Ratings downgraded its credit ratings -- and warned of a "real threat of bankruptcy" by the nation's third-largest newspaper publisher.

In a note by Chicago-based credit analyst Mike Simonton, Fitch downgraded McClatchy's "issuer default rating" (IDR) to C, a rating that it says "signals imminent or inevitable default."

As reported, McClatchy is offering certain big investors the chance to exchange $1.15 billion in debt that matures between 2011 and 2029 for as much as $60 million in cash and up to $175 million in new five-year notes that have a yield of 15.75%. The notes McClatchy is offering to exchange have yields ranging from 4.63% to 7.15%.

McClatchy has some $2.1 billion in debt, mostly amassed to make the blockbuster acquisition of Knight Ridder in 2006. Because ad revenue is falling industrywide, McClatchy has been unable to pay down that debt as rapidly as it would like, and some credit analysts have said the chain might violate terms of its loan agreements as early as 2010, putting it in at least technical default. …

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