McClatchy goes from 65 to 29 cents a share

By Karen Brettell
NEW YORK, Oct 17 (Reuters) - McClatchy Co's credit spreads are trading wide relative to its ratings, but with a depressed stock price the risk of the company buying back stock at the expense of debt holders outweighs benefits of its relatively high debt yields.

Newspaper publisher McClatchy on Tuesday reported a 55 percent drop in quarterly profit and said it did not know when an advertising slump caused by the real estate downturn would end.

The company, whose papers include the Sacramento Bee and Miami Herald, said its third-quarter income from continuing operations fell to $23.5 million, or 29 cents a share, from $52.6 million, or 65 cents a share, a year earlier.

In addition, on the conference call "CEO (Gary) Pruitt indicated that the McClatchy family is interested in buying stock and a buyback is a question of when (not if)," Barclays Capital analysts Hale Holden and Robert Arnold said in a report.

"This differs from prior comments when he said that, over the medium term, the company would focus on driving equity value through debt repayment," they said.

McClatchy's ailing stock price is pressuring management to increase the company's equity value at a time when peers such as Belo Corp (BLC.N: Quote, Profile , Research), E.W. Scripps Co (SSP.N: Quote, Profile , Research) and Tribune Co (TRB.N: Quote, Profile , Research) are undergoing reorganizations that have increased the value of their shares.

McClatchy's share price has plunged to $18 from around $41 at the beginning of the year.

Click on the headline to read the full story by by Karen Brettell of Reuters