By: E&P Staff The publisher of The Orange County Register said Monday that it may have violated its financial covenant terms for the quarter ending Sept. 30. Freedom Communications released a statement announcing that the company is in "active discussions with its lenders and intends to work closely with them to address the current situation."
Freedom said that it drew down on the balance of its revolving line of credit in response to the uncertainty roiling the credit markets.
Tuesday afternoon, Moody's Investors Service downgraded Freedom?s corporate debt rating to Caa1, which signifies ?significant risk? of default. The company?s rating had already been deep in junk territory at B3.
Moody?s also lowered its Probability of Default rating to Caa2 from Caa1, and slashed the rating of the $300 million senior secured credit facility to Caa1 from B3.
In addition to meeting the challenges hitting the newspaper industry, Freedom is seeking "strategic alternatives." The company announced on Monday that the East Valley Tribune in Mesa, Ariz., was cutting its frequency to four days a week and trimming its staff by 40%.
"The initiatives we have undertaken were designed to strengthen our business, better position our publications to compete for advertising revenues, and right size the cost structure of the business," Scott Flanders, president and CEO of Freedom, said in a statement. "Deleveraging our balance sheet to better reflect current revenue streams will be another important step in our company's transformation."
Freedom is the latest company to announce trouble with its debt load. Philadelphia Media Holdings and the owner of the Star Tribune in Minneapolis missed interest payments. Additionally, last week Gannett said it was drawing down on some of its credit due to the tightening of the market.
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