By: E&P Staff Standard & Poor's Ratings Services Friday downgraded Morris Publishing Group's subordinated debt two notches deeper into junk territory, warning that lenders are unlikely to see any of their money back if poor economic conditions force a default.
S&P said lowered its rating of the subordinated debt parent of The Florida Times-Union in Jacksonsville and 11 other dailies to CCC-. S&P also said it downgraded Morris' recovery rating to 6, "indicating that lenders can expect negligible (0% to 10%) recovery in the event of a payment default." The recovery rating for that debt had been a 5.
Morris's senior secured credit facilities were rated B, and its overall corporate credit rating was designated CCC+. Both ratting indicated a likelihood of default in "adverse economic conditions," under S&P's ratings definitions. S&P said its rating outlooks remains negative, meaning further downgrading is possible.
"The revised subordinated debt ratings reflect the potential for higher levels of secured borrowings under the revolving credit facility than we had factored into our previous analysis," said S&P credit analyst Liz Fairbanks.
The downgrade follows Morris' announcement Wednesday that it had entered into a third amendment to its senior secured credit facility, loosening financial covenants, while increasing the price of borrowing, and reducing the revolving credit commitment to $100 million from $175 million.
The corporate rating, S&P said, "reflects our concern that, even with the amendment to financial covenants, the company will be unable to sustain its current capital structure over the next several quarters without a significant improvement in the operating environment."
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