Tuesday, June 17, 2008

Report: MediaNews 'in danger of default'

Bloomberg News quotes Standard & Poor's analyst Emile Courtney as saying that Sam Zell's Tribune Co. could face default by the end of the year, and that other newspaper companies in danger of default include MediaNews Group, the Bay Area's largest publisher.
    Newspapers are selling today for about six times earnings, said Sammy Papert, chairman of Belden Associates, a newspaper consulting firm in Dallas. This is below the 11.5 times earnings that MediaNews and Hearst Corp. paid in a $1 billion deal for the Mercury News and three other newspapers in 2006.

    Since then, Denver-based MediaNews, the second-largest closely held U.S. newspaper company by circulation, had its credit rating slashed four levels by S&P to B-, or six levels above default. Debt rated B is likely to become impaired in adverse business, financial or economic conditions, S&P notes.

    Singleton expects the company, with average weekday circulation of 2.6 million in fiscal 2007, to remain in compliance with debt covenants, the chief executive officer said in a June 12 telephone interview.

    On June 30, if MediaNews has the debt-to-cash flow ratio of 6.53 times it reported on Dec. 31, 2007, it would be in violation of its loans, according to S&P.

    ... Newspaper companies are trying to conserve cash. ... MediaNews is sharing editorial content with other publications to save money, Singleton said. It has also cut pages and lowered the weight of its newsprint. ``We plan ahead,'' Singleton said. ``We've been doing that for 25 years. That's not going to change just because we're going through an economic downturn.'' (More)

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