Fitch Rates Cox Outlook 'Positive'

By: E&P Staff Fitch Ratings Friday upgraded to "positive" the outlooks for the debt ratings of Cox Enterprises Inc. and its subsidiary Cox Communications.

Fitch, which affirmed its previous debt and default ratings, said Cox's "continued strong operating performance and management's continued commitment to a conservative balance sheet could result in an upgrade in the next two to three quarters." Fitch had rated its outlook as "stable."

The New York City ratings agency was upbeat on Cox overall -- but decidedly bearish about the newspaper holdings of Cox, publisher of The Atlanta Journal-Constitution and 16 other dailies.

"Fitch has become increasingly concerned with the newspaper sector, which accounts for 10% of CEI's consolidated revenue," it said. "Cox Newspapers has experienced significant margin deterioration over the last few years as readers continue to migrate to online sources of news and information. Fitch believes through cost controls and its ValPak (direct mail) business that the newspaper segment can continue to generate positive free cash flow over the intermediate term."

But Fitch said it believes Cox's Auto Trader business "should continue to produce above-average growth over the intermediate term as volume and liquidity continue to increase on its platform."

For both CEI and Cox Communications, Fitch gave an Issuer Default Rating (IDR) of "BBB-," its lowest investment-grade rating. It rated the senior unsecured debt of both at "BBB-."


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