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Moody's: Denver Post owner has higher risk of loan default

By John Rebchook, Rocky Mountain News (Contact)

Published December 12, 2008 at 12:05 a.m.

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SPECIAL SECTION » The Rocky Mountain News is for sale. On December 4, 2008, E.W. Scripps, the owner of Colorado’s oldest newspaper, said if a buyer does not step forward it will pursue other options – including closure.

Click to read stories about the sale, and see what other news outlets have been saying about the paper since the announcement.

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Moody's Investors Services on Thursday said that William Dean Singleton's MediaNews Group faces increased risk of defaulting on its loans, as it downgraded almost $1 billion of the debt for the parent company of The Denver Post.

Moody's said it is concerned that the "downturn of the company advertising sales will be significantly more protracted than previously anticipated, further straining the company's liquidity profile and heightening the probability of a covenant default."

The rating downgrade comes a week after E.W. Scripps announced that it is placing the Rocky Mountain News on the sales block, as well as its 50 percent interest in the Denver Newspaper Agency.

Scripps and Denver-based MediaNews are equal partners in a Joint Operating Agreement. Under the JOA, each paper competes editorially, but the agency handles the business operations for both papers. The JOA debt is held separately from the rest of MediaNews or Scripps.

MediaNews released a statement Thursday saying that "the current economic downturn has given newspapers and all advertising based media companies challenges not seen in recent memory. All newspaper companies are facing credit downgrades, and MediaNews Group is no exception. MediaNews has always been an industry leader in tightly managing its businesses and liquidity in good times and bad."

In a telephone interview, Singleton disputed a suggestion by the newspaper trade publication Editor & Publisher on its Web site that MediaNews' leverage approaches that of Sam Zell's Tribune Co., which sought Chapter 11 bankruptcy protection this week.

Singleton said MediaNews is different from most newspaper companies, in that Hearst Corp., which has an interest in some MediaNews papers, "owns the largest piece of our debt."

Moody's ratings actions affected about $962 million of debt of MediaNews, a company with about $1.2 billion of annual revenues. The rating service downgraded the debt for MediaNews Group's Corporate Family to Caa3 - three notches below the previous rating of B3.

The New York City-based rating agency said it calculates MediaNews leverage as more than eight times debt to EBITDA (earnings before interest, taxes, depreciation and amortization).

The Tribune Co. filed for bankruptcy as it feared violating its credit covenants of nine times EBITDA.

The Moody's report said the privately held MediaNews has seen a 16 percent decline of total sales during the third quarter and has a "significant weakening in its liquidity profile." It added the company has a senior credit agreement coming due in December 2009 that poses a "refinancing risk."

Jeff Smith contributed to this report.

Comments

  • December 12, 2008

    9:41 a.m.

    Suggest removal

    TheDenverB writes:

    wow. so, we'll be without ANY major dailies soon? that's just freaking great.

    i can't wait until ron and libby are the only game in town.

  • December 12, 2008

    10:30 a.m.

    Suggest removal

    RoyalPayne writes:

    Perhaps if these newspapers wern't so far left they are ready to tip over things would have gone better for them.

    Finding a truly fair media is next to impossible.

  • December 12, 2008

    10:41 a.m.

    Suggest removal

    psu96 writes:

    royalpayne,
    because the internet had nothing to do with newspapers going under,,,,nice spin

  • December 12, 2008

    11:08 a.m.

    Suggest removal

    Yankee writes:

    Barack will allow left-wing papers to fail. The Post will get bailed out.

  • December 12, 2008

    11:09 a.m.

    Suggest removal

    Yankee writes:

    Make that

    Barack will not allow...

  • December 12, 2008

    11:35 a.m.

    Suggest removal

    JustSayin writes:

    This owner wants to out-source everything involved with the Post, anyway, so expect in a few years that the Denver Post will be 'local' in name only, with much of the work being done in India. Which may not be too bad, as they understand and write English as well as many of our own countrymen, anyway.

    Time to throw everything away and start anew - the system is broken. RATM

  • December 12, 2008

    12:25 p.m.

    Suggest removal

    TheDenverB writes:

    wow. i was just being sarcastic... but it seems some of you have sadly no clue how the media works.

    i suggest reading chuck klosterman's piece on that.

    "all i know is what i read in the papers"

    http://tinyurl.com/6e4bcx

    seriously.