S&P drops American Media

Standard & Poor's said it lowered American Media Inc.'s rating to D from CCC, along with its 14% senior subordinated notes to D from CC with the recovery rating at 6, indicating an expectation of 0% to 10% recovery in a default. The agency also said it affirmed the company's secured loans at CCC+ with a recovery rating of 2, indicating an expectation of 70% to 90% recovery in a default. The agency affirmed the company's 9% senior unsecured pay-in-kind notes at CC with a recovery rating of 6.

The downgrade reflects American Media's ongoing deferral of its May 1 interest payment on the 14% notes, S&P said. The company stated that 75% of noteholders consented that the payment be deferred until June 21, the agency said.

S&P said it still considers this deferral a default, and also considers American Media's high leverage, weak interest coverage, adverse secular trends in newspaper and magazine publishing, thin margin of compliance with its financial covenants and limited liquidity.

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