Moody's rates Liberty Group loan B2

Moody's Investors Service said it assigned a B2 rating to Liberty Group Operating Inc.'s proposed $330 million senior secured credit facility, which includes a $50 million senior secured revolver due 2011 and a $280 million senior secured term loan B due 2012.

The senior implied rating is B2, and the issuer rating is B3.

In January, Liberty Group Operating Inc. announced a recapitalization under which it will issue a $330 million senior secured credit facility and use the proceeds to retire its existing bank facility and subordinated notes in full and redeem a portion of its parent's senior discount notes and preferred stock.

Moody's said the ratings reflect the high level of debt and preferred stock of Liberty Group Operating Inc. and Liberty Group Publishing Inc. compounded by the high accretion rates on the discount notes and preferred stock obligations, the limited growth potential of the company's core operations and continuing competition in its suburban Chicago markets.

Ratings are supported, the agency said, by the strength of Liberty Group's community newspaper business model, a gradual pick-up in newspaper advertising spending following a recent market slump, and the expertise of Liberty Group's strong management team.

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