By: E&P Staff The recession and the global credit crunch will combine to keep down advertising spending and media revenue in Canada, with newspapers likely to be hurt the most, Moody's Investors Service said Wednesday.
In an executive summary of the report "Canadian Telecommunications, Media and Technology Companies -- Winter 2009 Briefing," Moody's says that within these sectors "advertising-sensitive companies in the newspaper publishing and television broadcasting" will be most affected.
"The recession will adversely affect advertising revenues, and EBITDA (earnings before interest, taxes, depreciation and amortization) will
decline," Moody's Vice President and Senior Credit Officer Bill Wolfe said, "and this temporal matter may have lasting implications for these two struggling sectors."
Most hurt by the downturn will be the highly indebted companies, Wolfe added.
The report specifically cites Canwest Media, the largest publisher of English-language newspapers in Canada, as "one of the most vulnerable companies, because of potential financial covenant compliance issues and refinance milestones" in its loan agreements.
E&P's business-oriented
Fitz & Jen blog reported Tuesday that another credit rating agency, Standard & Poor's Ratings Services downgraded the credit rating of Canwest Media well into junk territory over liquidity concerns.
S&P said Canwest could violate e leverage covenants -- the permissible ratio of debt to EBITDA -- of its credit agreements by Feb. 28, possibly triggering penalties ranging from higher borrowing costs to demands for immediate repayment of the entire principle.
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