By: Mark Fitzgerald Moody's Investors Services has downgraded Freedom Communications Inc. overall credit rating a notch on concerns about its high debt and the newspaper business in general.
The downgrade of Moody's Corporate Family Rating (CFR) to Ba3 from Ba2 "results from a weakening of Freedom's top line and EBITDA (earnings before interest, taxes, deductions, and amortization), which has led to a deterioration of the company's leverage and coverage metrics beyond levels previously expected," the New York City-based ratings agency said.
Ba3 is Moody's lowest investment grade rating.
Moody's said the rating reflects Freedom's "high financial leverage, the vulnerability of its business to print advertising spending, the competition which it faces in a number of markets, and the secular pressure faced by the newspaper publishing sector as a whole."
The rating remains investment grade because of the "reputation of Freedom's leading papers" such as The Orange County Register, and the geographic diversity of its operations. Freedom has "attractive' free cash flow and a "good liquidity profile," Moody's said.
The downgrade affects about $950 million in debt.
Moody's said Freedom's rating outlook is "stable."
Moody's said while it expects soft market conditions for newspapers, it expects Freedom's free cash flow to improve "over the intermediate term," allowing it to pay down more debt.
In early trading Tuesday, McClatchy stock (NYSE: MNI) was at $13.74, up 12 cents, or 0.88%, from its opening.
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