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I AGREE
20 Nov 2003
MOODY'S ASSIGNS B2 RATING TO MEDIANEWS GROUP INC.'S PROPOSED $300 MILLION SENIOR SUBORDINATED NOTES; ALL OTHER RATINGS CONFIRMED; OUTLOOK CHANGED TO POSITIVE FROM STABLE
Approximately $500 Million in Debt Securities Affected
New York, November 20, 2003 -- Moody's Investors Service has assigned a B2 rating to MediaNews
Group Inc.'s (MediaNews) proposed $300 million Senior Subordinated
Notes due 2013. In addition Moody's has confirmed all existing
MediaNews ratings, including:
$300 million of 8.75% Senior Subordinated Notes due
2009 - B2
$200 million of 8.625% Senior Subordinated Notes
due 2011 - B2
Senior Implied rating - Ba3
Issuer rating - B1
Moody's has not assigned a rating to MediaNews's proposed $600
million senior secured credit facility.
The rating outlook has been changed to positive from stable.
The ratings reflect MediaNews's high financial leverage (estimated
at approximately 5.5 times debt to proportionate EBITDA);
the potential for further acquisitions (following its recent unsuccessful
bid for Freedom Communications); and vulnerability to soft print
advertising spending and gradual circulation count slippage.
The ratings are supported by the leading position enjoyed by MediaNews
in its markets, either by itself or as a joint operating agreement
(JOA) partner; the demographic growth potential, especially
in its California, Colorado and Utah markets; the ability to
largely withstand market slowdowns in newspaper advertising spending as
recently evidenced; and relatively strong asset value coverage.
The change in outlook to positive from stable is predominantly reflective
of MediaNews's positive cash generation, which has been used
in part to reduce debt. The positive outlook also signals Moody's
expectation that the company is on track to further reduce leverage over
the intermediate term.
MediaNews accounts for its investment in unconsolidated JOA's according
to the equity method. In addition, the company provides pro-rata
consolidated financial information, which Moody's uses in
its analysis as a more meaningful gauge of the company's financial
performance.
For 3Q03, MediaNews recorded 3% year-over-year
top line growth, due largely to the acquisition of certain California
publications.
At the end of September 2003, pro-forma for the proposed
(unrated) $600 million senior secured bank credit facility,
MediaNews recorded liquidity of $222 million, comprising
$7 million in cash equivalents and $215 million in undrawn
revolver availability. This liquidity is supplemented by free cash
flow generation, which totaled approximately $80 for the
LTM period ended September 30, 2003, calculated on a proportionate
basis.
Ratings could be lifted if MediaNews is able to permanently reduce debt
to less than five times EBITDA on a proportionate basis, and at
the same time allay Moody's concerns regarding future acquisition-related
event risk. Conversely, ratings could be lowered if MediaNews
financial leverage worsens as the result of a shortfall in cash generation
expectations, or because of debt financed acquisitions.
The proposed $300 million of senior subordinated notes, due
2013 will effectively refinance the company's existing $300
million of 8.75% senior subordinated notes, due 2009.
The rating for the proposed notes is notched down from the senior implied
rating in recognition of its ranking (contractually and effectively) behind
the proposed (unrated) $600 million senior secured bank credit
facility. The ratings also recognize the relatively high asset
coverage afforded to all creditors, even under a downside scenario.
Headquartered in Denver, Colorado, MediaNews is one of the
nation's largest newspaper publishing groups. 2003 proportionate
sales totaled approximately $1 billion.
New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
John Page
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
No Related Data.
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