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Rating Action:

Moody's Assigns Paxton Media B2 CFR, B3 PDR; Outlook Stable

29 Oct 2010

Approximately $240 Million of Debt Rated

New York, October 29, 2010 -- Moody's Investors Service assigned Paxton Media Group, LLC ("Paxton Media") a B2 Corporate Family Rating (CFR) and a B3 Probability-of-Default Rating (PDR). Additionally, B2 instrument ratings were assigned to the company's new $10 million senior secured revolver and its new $230 million of senior secured term loans. The new revolver and term loans refinance existing credit facilities and notes which were unrated and scheduled to mature March 2011 and June 2012, respectively.

..Assignments:

..Issuer -- Paxton Media Group, LLC

....Corporate Family Rating -- B2

....Probability-of-Default Rating -- B3

....Senior Secured Revolver due 2015 -- B2, LGD 3, 33%

....Senior Secured Term Loan A due 2013 -- B2, LGD 3, 33%

....Senior Secured Term Loan B due 2016 -- B2, LGD 3, 33%

..The rating outlook is stable.

RATINGS RATIONALE

The B2 corporate family rating reflects the company's high leverage, decreasing circulation levels, the secular decline in demand for print advertising, and a weak economic environment. In addition, Paxton Media lacks national or super regional scale and is concentrated in southeast and mid-western U.S. markets. The company is well positioned in the B2 rating category and is supported by good EBITDA margins, 14%-15% free cash flow as a percentage of debt as well as meaningful required term loan reductions. The combined term loans amortize at a minimum of 6% annually and 75% of excess cash flow is required to reduce term loan outstandings when the Leverage Ratio (as defined by the credit agreement) exceeds 3.0x. Liquidity is adequate and enhanced by the proposed $10 million revolver which is expected to be largely undrawn. Although revenues and EBITDA are expected to be flat over the rating horizon, credit metrics including debt-to-EBITDA leverage and interest coverage ratios should improve as free cash flow is applied to reduce term loan balances. We believe management is motivated to reduce debt balances and lower annual debt service to gain operational flexibility as well as to be in a position to reinstate distributions to family owners.

The stable outlook reflects our view that revenue and EBITDA will remain in line with expectations and that free cash flow will be applied to reduce debt balances. Our outlook also incorporates the potential for annual distributions up to $2.5 or $5.0 million whenever the Leverage Ratio (as defined in the credit agreement) is below 3.0x or 2.0x, respectively.

Ratings could be considered for an upgrade if the economic environment improves resulting in a rebound in advertising revenues, stable circulation, and debt-to-EBITDA leverage ratios being sustained comfortably below 3.5x (including Moody's standard adjustments). Ratings could be downgraded if revenues were to decrease, EBITDA margins erode, or liquidity becomes strained as a result of a weak economy and/or secular declines.

The principal methodologies used in rating Paxton Media Group LLC were the Global Newspaper Industry published in September 2008 and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Paxton Media Group, LLC ("Paxton") is a family controlled, privately held media company that owns and operates 32 community newspapers in nine states with total daily circulation of approximately 291,895. The company also owns the NBC affiliate in Paducah, Kentucky, and numerous weekly, shopper and niche publications located primarily in the southeast and mid-western United States. The company was founded in 1896 and is headquartered in Paducah, Kentucky. The Paxton family owns approximately 98.7% of economic and voting control with the remaining interests held by families of current and former managers. Paxton Media reported approximately $154 million in revenues for the 12 months ended September 2010.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Carl Salas
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's Assigns Paxton Media B2 CFR, B3 PDR; Outlook Stable
No Related Data.
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