Gannett Credit Downgraded Again, This Time By S&P

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By: Mark Fitzgerald

For the second consecutive day, a credit ratings agency on Tuesday downgraded the debt incurred by Gannett Co. Inc. And once more, the agency said it believes the dropping revenue and cash flow at the nation’s largest newspaper company is likely to accelerate.

Standard & Poor’s cut its long-term corporate credit rating and senior unsecured debt rating to BBB- from BBB+, and assigned a negative outlook, meaning another downgrade is possible soon.

In S&P?s rating system, BBB indicates an obligation with ?adequate protection? for creditors — but one that indicates the company is likely to have ?weakened capacity? to meet its financial commitments under ?adverse economic conditions.? It is an investment-grade rating.

S&P downgraded Gannett short-term debt to A-3 from A-2.

S&P credit analyst Emile Courtney said the ratings reflect ?a worsening pace of decline? in ad revenue that has dropped 14% in the first three quarters of this year. The agency is concerned that total revenue could decline by another 20% in 2009, and EBITDA (earnings before interest, taxes, depreciation, and amortization) could decline 10%.

Late Monday, Moody’s Investors Services downgraded Gannett’s senior unsecured debt and issuer rating to Baa2, its minimum investment grade, from A3. It also assigned a negative outlook to the rating.

For an analysis of Moody’s rating action, check out E&P’s buisness-oriented blog, The Fitz & Jen blog.

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