McClatchy renegotiates loan to avoid default

This report is from Edtiror & Publisher

McClatchy Co. said Friday it has renegotiated its agreement with lenders to gain flexibility, winning concessions that help the company avoid a potential default as advertising revenue continued falling.

McClatchy said the amendment to a $1.175 billion debt agreement will change its terms to account for the company's reduced cash flow. In return, McClatchy agreed to put up more collateral and pay higher interest rates.

“It's important for the company to get additional flexibility,” said Mike Simonton, media analyst at Fitch Ratings, which analyzes corporate debt. “The company had exhausted much of the room it had under its prior covenant package.”

Simonton said McClatchy might have come close to hitting a technical default if it hadn't renegotiated the terms by Sept. 30. Such a default ultimately could have forced the company to sell assets or declare bankruptcy.

Other newspaper companies have been in similar situations this year.

“There are a number of newspaper companies negotiating with their bankers right now,” said Ken Doctor, media analyst for the research firm Outsell Inc.

Simonton said McClatchy's efforts to renegotiate debt started long before the meltdown in the financial services industry over the past few weeks, but “certainly getting a deal done in this environment had to be a challenge.”

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