(A.P.) – A more severe decline in cash flow than previously expected has led to a lowering of debt ratings deeper into junk for newspaper publishers MediaNews Group Inc. and Freedom Communications Inc. MediaNews Group publishes the Denver Post, while Freedom is the parent of the Colorado Springs Gazette.
Standard & Poor’s Ratings Services on Tuesday cut its issue-level rating on MediaNews’ secured credit facilities to “CCC” from “CCC+.” The “CCC” rating now matches the corporate credit rating for MediaNews, the Denver-based publisher of the San Jose Mercury News in San Jose, Calif., and The Denver Post.
The ratings agency lowered Freedom’s rating on its secured credit facilities to “CCC” as well, one step lower than the company’s corporate credit rating. Irvine, Calif.-based Freedom publishes The Orange County Register in Santa Ana, Calif.
S&P also cut MediaNews’ recovery rating to “4″ from “2.” The new rating expects a 30 to 50 percent recovery of loans extended to the company by lenders. Recovery ratings measure how likely a debt holder can recoup its investment after a payment default on a scale of 1 to 6, with full recovery of funds loaned pegged at 1.
Freedom’s recovery rating fell to “5″ from “3″ – indicating expectations of a 10 to 30 percent recovery in the event of a payment default.
S&P cited “challenging operating conditions” in the newspaper sector for its revisions. MediaNews and Freedom are privately held.