By: E&P Staff Moody's Investors Service downgraded the long-term credit rating of Tribune Co. Tuesday, citing the newspaper industry's problems in general, and, in particular, the Chicago-based media company's increased debt, ongoing stock repurchase program, and "weaker than expected" operating performance.
Moody's downgraded senior unsecured long-term debt of about $4 billion to ``Baa1'' from ``A3.'' The downgraded rating is the third lowest investment grade in Moody's system. It means the publisher of the Chicago Tribune and Los Angeles Times is seen by Moody's as a moderate credit risk that may have speculative characteristics.
Moody's said it expects that "Tribune's efforts to grow revenue and improve its operating margin will be challenged by secular pressures in the newspaper industry, particularly from internet competition."
Tribune's total debt to EBITDA (earnings before interest, taxes, depreciation and amortization) as calculated by Moody's is expected to remain 3x over the next year and a half to two years, the agency said, "reflecting an expectation of limited EBITDA improvements combined with share repurchases that potentially exceed free cash flow."
Moody's also assigned a negative outlook rating in the expectation that Internet and digital media investments will only partially offset potential declines in the core printing business. Moody's also said it expects weak audience share by Tribune's broadcast television properties will weigh on operating performance at least through 2007, after which affiliation with the newly formed CW network may help it recover audience share.
Moody's noted that Tribune's short-term debt was not included in this current review, which got underway March 17.
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