S&P, Fitch Downgrade Tribune Co. To Junk Status

By: E&P Staff Two big credit ratings agencies downgraded Tribune Co.'s credit ratings to junk status Friday, just hours after the Chicago multimedia company announced it was exploring options to increase value for shareholders, including selling off assets or taking the company private.

Both Standard & Poor's (S&P) and Fitch Ratings downgraded Tribune's ratings one notch to BB-plus, their highest non-investment, or junk, ratings. Both had previously rated Tribune at the lowest investment grade rating, BBB-minus.

Fitch suggested in a statement that Tribune has very little wiggle room as it is pressured by impatient investors, and is part of an industry that risks continued business deterioration.

Fitch was not impressed by the actions of Tribune's board of directors Thursday, in which the former dissident Chandler family interests agreed to unwind two complex partnerships, and the board appointed a special committee to explore "increasing value for shareholders."

"In Fitch's view, this announcement marks the second departure by management from stated financial policies in just over a year," the ratings firm said in a statement. "While ultimate financial policies are uncertain, operating results remain pressured and the rating watch negative reflects Fitch's belief there is a high probability that yesterday's announcement will result in a financial strategy that is detrimental to bondholders."

S&P also put Tribune on a negative ratings watch.

In its statement, S&P indicated it was disappointed Tribune did not follow up this summer's stock buyback with a reduction in its debt.

"Standard & Poor's had expected that Tribune would focus on debt reduction following the completion of the repurchases," S&P said.

This is the second time in four months S&P has lowered Tribune's rating. In May it cut its rating when the company announced a $2 billion program, much of it funded with debt, to buy back up to 25% of its stock in an effort to increase a share price that had drifted down more than 30% since 2003.

Fitch put Tribune's "issuer default rating" and other unsecured notes at the BB-plus junk status. It downgraded Tribune commercial paper to B from F3, its lowest investment grade rating.