Moody’s Gives Junk Rating To ‘Newsday’ Purchase Loan

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By: The Associated Press

Moody’s Investors Service said Friday it has assigned a noninvestment-grade “B1” rating to Newsday LLC’s proposed $650 million loan, which is being issued to finance Cablevision Systems Corp.’s acquisition of the newspaper publisher.

Last month, Cablevision (nyse: CVC – news – people ) agreed to buy the Long Island-based newspaper from Tribune Co. (nyse: TRB – news – people ) in a deal valued at $650 million. Tribune will retain a 3 percent stake in a joint venture that will include Newsday and related publishing assets.

Moody’s (nyse: MCO – news – people ) said Newsday’s credit risk is perceived to be very high. Newspaper publishers, including Newsday, have been under increasing pressure as advertising revenue drops due to the difficult economic environment and a shift of ad spending to the Internet.

Moody’s noted that the strong demographics of Newsday’s New York markets potentially mitigate some of these risks.

Moody’s affirmed Cablevision’s noninvestment-grade corporate family rating and probability of default rating at “Ba3.” Separately, Moody’s lowered Cablevision’s speculative grade liquidity rating to “SGL-4,” from “SGL-3.”

Moody’s attributed the downgrade to a projected liquidity shortfall over the next 12 to 15 months, particularly in the third quarter of 2009. Moody’s Senior Vice President Russell Solomon said the company is “walking a bit of a liquidity tightrope,” but expects the company to take advantage of its access to the capital markets to satisfy its obligations.

Cablevision, which is controlled by the Dolan family, has about 3.1 million cable TV subscribers in the New York metro area. The company also owns Madison Square Garden and other assets.

Cablevision shares lost 50 cents, or 2 percent, to $24.22 in afternoon trading. The stock has traded between $20.68 and $39.75 during the past 52 weeks.

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