KR shares up on buyback

Shares of Knight Ridder Inc. rose Friday after the company said it would accelerate the repurchase of 10 million shares of its own stock, but the move also led two credit agencies to lower ratings on the newspaper publisher's debt.

Fitch Ratings and Moody's Investors Service both dropped their ratings on Knight Ridder's debt, and Standard & Poor's revised its outlook for its own rating to negative from stable.Fitch said its downgrade reflects an unexpected increase in indebtedness from the repurchase at Knight Ridder while the publisher's results continue to be pressured. Moody's also cited the stock buyback, and both agencies expressed concern about a general long-term decline in newspaper irculation.

Fitch downgraded Knight Ridder's senior unsecured debt to BBB from A-, which is still two levels higher than speculative grade or "junk" status. Moody's downgraded the company's rating to A3 from A2, the fourth-lowest investment grade level. Lowered credit ratings can increase a company's borrowing costs.

San Jose, Calif.-based Knight Ridder, whose 32 daily newspapers include the Beacon Journal, said in a statement late Thursday that it had already repurchased half of the shares it intends to take off the market under the current plan.In a private transaction, the company on Thursday bought back 5 million shares from Goldman Sachs Group Inc. for $312 million, or $62.36 per share.

The remaining 5 million shares will be repurchased in the open market. Companies buy back their own shares in a bid to increase their value and to raise earnings per share buy reducing the amount of shares outstanding.With Thursday's transaction, Knight Ridder has bought back 8.3 million shares, of 11 percent of its outstanding stock, so far this year. It repurchased 12.6 million shares during the previous three years.

The company's board authorized the 10 million-share stock buyback program on July 19, in addition to the 1.8 million shares remaining from the previous stock buyback authorization.The announcement sent Knight Ridder's shares up $3.47 or 5.6 percent to $65.83 on the New York Stock Exchange. The shares have traded between $60.09 and $71.07 over the past year.

[From BusinessWeek online and other business publications]