By: E&P Staff
Fitch Ratings said Tuesday it has downgraded Dow Jones & Co.’s senior unsecured debt to “BBB+” from “A-,” chiefly because of weakness in the overall newspaper sector, but also because it is disappointed the pending sale of six Ottaway community newspapers will not draw down more debt.
Fitch also assigned Dow Jones a “negative” rating outlook.
Last week, Dow Jones announced an agreement to sell the six papers to Community Newspapers Holdings Inc. (CNHI) for after-tax proceeds of $268 million, which it said would be used to pay for its acquisition of the remaining 50% stake in Factiva and debt reduction.
“While Fitch views the Factiva acquisition as strategically important for Dow Jones (further diversifying revenue away from traditional print), the downgrade reflects the lower than expected debt reduction, as well as general secular issues related to the newspaper industry,” New York City-based Fitch said.
Fitch said advertising volume at the flagship Wall Street Journal has been “volatile,” and that with ads already priced at a premium relative to other papers it “may be challenged to raise and/or retain pricing in this environment.”
But Fitch said that its “BBB+” Issuer Default Rating (IDR) is justified by “Dow Jones’ strong brands, diversification of revenues and pro forma credit metrics.”
The negative outlook, it said, “reflects the general pressure facing traditional advertising based media such as newspapers, as well as the integration and execution risk related” integrating Factiva.
“While Fitch has a negative view on the newspaper space, Dow Jones is more diversified than many of its traditional print competitors,” the ratings agency said.