McClatchy Credit Ratings Upgraded as it Concludes $875 Million Debt Refinancing

By: Mark Fitzgerald Two of the three biggest credit ratings agencies upgraded their ratings of The McClatchy Co. late Thursday as The Miami Herald parent concluded its sale of $875 million of senior secured notes that pays off impending loans and stretches maturities out to 2017.

McClatchy said it used the proceeds of the private offering to pay off $567l.3 million in bank loans and another $171.1 million in bonds. Wednesday McClatrchy completed the buyback of of $147.2 million in the notes due in June 2011 and $23.85 million in notes that matured in 2014.

Standard & Poor's Ratings Services upgraded McClatchy to B- from CC. The new rating is still in junk territory, but takes it out of the highly speculative category.

Moody's Investors Service moved McClatchy's corporate family rating (CFR) up a notch to Caa1 from Caa2. Both ratings are defined as "bonds of poor standing."

The notes sold through Thursday carry an interest rate of 11.5% and mature in 2017. The rate had been criticized by some equity investors, which knocked McClatchy's share price down briefly when the notes were priced last week.

McClatchy CFO Pat Talamantes defended the pricing in a statement: "While these new notes bear a higher interest rate than our bank debt, it is a fixed rate that we believe will reduce interest rate risk for McClatchy. Today, approximately 87% of our outstanding debt is at a fixed rate and 13% is at variable or floating rates."

Talamantes noted that the refinancing considerably reduces the bank debt coming due in June 2011 to $72.3 million. Another $189.6 million in bank debt will not come due until July 2013.

"As of the close of the refinancing transaction, we have debt outstanding, net of cash on hand of $1.96 billion and we have $196.3 million available under our credit facilities to fund our short-term liquidity needs," Talamantes said.