Moody’s Warns Of Gannett Credit Downgrade

By: Mark Fitzgerald

The financial crunch and the newspaper industry’s well-publicized woes are now impacting even chains with gold-plated credit cards.

On Thursday, Moody’s Investors Service placed Gannett Co. Inc.’s enviable A3 senior long-term debt ratings on review for a possible downgrade.

“The review is prompted by the ongoing and deepening declines in Gannett’s newspaper revenue and Moody’s concern that the company’s revenue-enhancement initiatives and cost reduction actions may not be sufficient to prevent continued erosion in free cash flow over the next 12-18 months,” wrote senior analyst John E. Puchalla and Alexandra S. Parker, managing director of the ratings service’s corporate finance group.

Moody’s did affirm the Prime-2 rating on Gannett commercial paper, saying it expects the nation’s largest newspaper chain “will continue to generate meaningful free cash flow from its large and geographically diverse portfolio of newspaper and broadcast properties, and that the company will manage its balance sheet to maintain conservative credit metrics.”

During the review process, Moody’s said, it will be looking at Gannett’s strategies to stabilize revenue and cut costs during the cyclical downturn in the U.S. and Britain, where it publishes the Newsquest group.

“In addition, Moody’s will review the potential for asset impairment charges to erode the company’s cushion within the $3.5 billion minimum shareholders’ equity covenant in its backup credit facilities,” the ratings service said.

Just before the 4 p.m. EDT market, shares of Gannett (NYSE: GCI) were trading at $17.00, up 43 cents, or 2.6%.

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