Washington Post Co.'s High Credit Rating 'Stable,' S&P Says

By: Mark Fitzgerald The Washington Post Co. is one of the few big newspaper publishers that managed to retain a high investment-grade credit rating during the crisis year of 2009. On Thursday, Standard & Poor's Ratings Service changed its rating outlook to "stable" from "negative," meaning it does not expect to downgrade the rating in the near future.

"The outlook revision reflects the expectation that our measure of the company's net leverage will decline in 2009 to less than 1x (times), which is adequate for the 'A' rating, and remain under 1x throughout 2010," S&P credit analyst Emile Courtney said. The net leverage ratio is net assets divided by tangible equity capital.

In S&P's ratings definitions, A is the third-highest investment-grade category. "An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories," the definition states. "However, the obligor's capacity to meet its financial commitment on the obligation is still strong."

S&P said it expected the company's EBITDA (earnings before interest, taxes, depreciation and amortization) for all of 2009 to "decline less than we had previously expected" when it downgraded the Post Co.'s credit rating last June. The ratings firm said the company's improved performance was driven by its education division.

"Due to better-than-anticipated operating outperformance in 2009, we expect the company will generate more than $260 million in discretionary cash flow (after dividends) this year, compared to our previous expectation that discretionary cash flow would be about $75 million," it said.

With its improved liquidity, S&P said, Washington Post Co. could afford to make "modest-size acquisitions" or buy back some of its stock.

"We also anticipate that the company will maintain its strong liquidity profile, assuming operating performance in 2010 does not deteriorate significantly relative to our expectation," S&P said.

"The continuing operating challenges and restructuring risks associated with the company's newspaper and magazine publishing segments, as well as an historically acquisitive growth strategy, only partially mitigate these positive rating factors," S&P added.

The entire S&P note is posted at E&P's business-oriented Fitz & Jen blog.