By: Mark Fitzgerald
Amidst a credit freeze that has driven debt-laden newspaper chains further into junk credit ratings as they renegotiate with lenders, Standard & Poor’s Ratings Services and Moody’s Investors Service did something unusual Tuesday: They each assigned a strong investment-grade rating to The Washington Post’s proposed offering of notes.
After markets closed, S&P rated the Post Co.’s $400 million senior unsecured notes due 2019 as A+, a rating that suggests, in the words of the rating agency’s definition, the diversified media company’s “capacity to meet its financial commitment on the obligation is still strong.”
Moody’s weighed in almost simultaneously with an A1 rating, which in its definition puts the Post offering on the high end of a “high quality” credit rating.
The rating certainly doesn’t signal either S&P or Moody’s is keen on the newspaper business, however. In a note, S&P analysts Emile Courtney and Liz Fairbanks note that they’ve hung a “negative outlook” on the Post Co.’s overall credit rating, suggesting it could be downgraded.
“The negative rating outlook reflects our moderately weakened view of the company’s business diversity, given the expectation that the economy and secular pressures will likely require Washington Post to absorb losses in the newspaper and magazine publication division,” they write.
Like them Moody’s analyst and Vice President John Puchalla expressed concern that the Post Co. is getting acquisitive, and about its newspaper and Newsweek properties.
“Moody’s anticipates growth in the Kaplan education and CableOne cable television business will mitigate some of the secular and cyclical pressure in the traditional media properties over the next several years, but that earnings growth might not be sufficient to return leverage to the levels appropriate for the A1 rating,? he wrote.
More details of the ratings action are available at E&P’s business-oriented blog “Fitz & Jen”