By: Mark Fitzgerald
Moody’s Investors Service, the big credit rating agency, said Wednesday it is reviewing The Miami Herald parent for a possible upgrade of its corporate credit rating. Moody’s said the $875 million refinancing McClatchy is proposing could improve its liquidity and ability to handle debt in an rebounding economy.
Moody’s made it clear, however, that McClatchy debt, totaling about $1.95 billion, would still be rated speculative-grade, or junk. But the review signals that creditors no longer believe McClatchy faces any imminent threat of defaulting or going through a restructuring such as Chapter 11 bankruptcy.
The upgrade in McClatchy’s “corporate family rating” (CFR) would be from its present Caa2 to Caa1 if the refinancing is completed. Both ratings are defined as “bonds of poor standing” in Moody’s credit definitions.
“The prospective CFR upgrade is based on the company’s improved liquidity position and reduction in near-term default risk as a result of pushing out maturities and amending the financial
maintenance covenants, and McClatchy’s ability to stabilize EBITDA through significant cost reductions,” Moody’s senior analyst John E. Puchalla wrote.
More details on the Moody’s credit action are at E&P’s business-oriented Fitz & Jen blog.