S&P Sends Tribune Co. Debt Rating Deeper Into Junk Territory

By: E&P Staff A day before Tribune Co. stockholders are to approve real estate mogul Sam Zell's deal to take Tribune Co. private, Standard & Poor's on Monday cut the Chicago media giant's debt rating to four notches below investment grade -- and said it would downgrade it deeper into junk territory when the highly leveraged buyout is consummated.

S&P revised Tribune's corporate credit rating to "B-plus" from BB-minus, citing what it said was its expectation that operating performance and cash flow will come in below previous estimates.

If the deal to take Tribune private through an employee stock ownership plan structure goes through, S&P added, it is likely to reduce its rating another grade to "B," with a negative outlook, meaning another rate cut is possible.

S&P said it expected that newspaper advertising and circulation revenue will decline in 2008, "but at lower rates than expected for 2007."

Wall Street apparently shrugged off the credit downgrade -- as well as a New York Times article that suggested the deal was in trouble - as it bid Tribune (NYSE:TRB) up $1.31, or 5.10%, to 26.98 in mid-afternoon trading.