S&P, Fitch lower McClatchy Co. ratings

Two ratings companies dealt another one-two blow to the cash-strapped McClatchy Co., lowering the newspaper giant’s debt rating deeper into junk status Friday.

Standard & Poor’s dropped the Sacramento-based company to “CCC-plus,” seven steps below the “B” investment grade. Also, Fitch Ratings downgraded McClatchy to “CCC” from “B-minus.”

A lower grade increases the cost to borrow money, a major concern for corporations such as McClatchy reeling from the recession.

Fitch and S&P analysts are concerned about McClatchy’s ability to pay off its $2 billion-plus debt, incurred when the company bought Knight Ridder Newspapers Inc. in 2006. McClatchy (NYSE: MNI) could endure an almost 20 percent decline in revenue this year, forcing the company to miss debt payments and renegotiate deals with lenders who may balk at the proposal, according to S&P.

McClatchy — publisher of The Sacramento Bee and 29 other daily newspapers — reported a fourth-quarter loss of $21.7 million Thursday and will take aggressive cost-cutting efforts to trim $100 million to $110 million from expenses this year. The compay has already had two rounds of buyouts and layoffs, frozen pay increases, and chairman and chief executive officer Gary Pruitt will not accept bonuses during the next two years. McClatchy also has frozen pensions and halted employee-matching contributions to the 401(k) program.

In addition, the company could be delisted from the New York Stock Exchange because its shares are below $1. The company has until Feb. 19 to detail a plan to boost its sagging share price. Shares of McClatchy remained unchanged at 71 cents Friday, near a one-year low and well off its price of $33 two years ago.

McClatchy, like newspaper chains nationwide, has been battling declining advertising revenue and fewer subscribers.
[Source: Sacramento Business Journal]