Wednesday, March 18, 2009

S&P lowers MNG's debt rating

The AP and Denver Business Journal report that Standard & Poor's Ratings Service has lowered the debt rating for MediaNews Group, the Denver-based chain that owns the San Jose Mercury News and 10 other dailies in the Bay Area.

The revised rating, issued Tuesday, “reflect[s] a more significant decline in cash flow than that used in our previous analysis” as well as “challenging operating conditions in the newspaper sector,” S&P said in its credit analysis of MediaNews Group.

Specifically, S&P lowered its issue-level rating for MNG's secured credit facilities to CCC from CCC+, bringing the rating in line with the chain’s corporate credit rating.

S&P also reduced its “recovery rating” on MediaNews Group’s loans to “4” from “2.” The “4” rating means S&P expects 30 percent to 50 percent recovery for lenders in the event of a payment default. S&P’s recovery rating is on a scale of 1 to 6, with 1 meaning full recovery of loans after a payment default is expected.

In a separate report, S&P said that it believes “that if MediaNews were to default, there would continue to be a viable business model driven by the importance of its newspaper businesses to a smaller, core customer base.”

MediaNews Group has repeatedly said that it is not in danger of default and that recent credit ratings are overly harsh on the company.

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