Debt from Knight Ridder now junk-bond status

When McClatchy bought the former Knight Ridder papers in 2006, it paid $4.5 billion and took on $2 billion in debt. That debt is now rated at junk-bond status and shares of the company (NYSE:MNI) have fallen more than 90 percent from their 52-week high of $13.31 per share on Dec. 26, 2007. As of Friday’s close, McClatchy was at 81 cents a share, giving it a market capitalization of $66.8 million. And that’s an improvement from its all-time low it hit on Christmas Eve. No one thinks McClatchy is on the verge of bankruptcy filing, but the company’s financials are hardly sound.

* The parting out will accelerate: Much like you do with an old car that is beyond repair, the industry will begin to see if the sum of the parts is worth more than the whole. When McClatchy quietly put The Miami Herald up for sale earlier this month, it was a clear example of how far this industry has fallen. Once considered one of the flagship papers of the Knight Ridder chain, the Herald had been such a low performer in both chains for so many years and that now the paper’s primary value is considered to be in its prime waterfront real estate. Expect chains to attempt to spin off more individual properties to shore up the balance sheet. However, few buyers will materialize. And the lack of liquidity has little to do with it. After all, it’s cheaper to wait and buy after the bankruptcy. Anyone at 400 West Seventh Street who still harbors the fantasy of the Basses riding to rescue in fit of civic altruism should remember this.

[Source: :Dallas-Fort Worth PegasusNews.com]