Moody's downgrades McClatchy

Moody's Investors Service said it downgraded McClatchy Co.'s corporate family and probability-of-default ratings to B2 from Ba3, senior unsecured bank facility to Ba2 (LGD2, 22%) from Ba1 (LGD2, 25%) and senior unsecured bond to Caa1 (LGD5, 80%) from B1 (LGD5, 80%).

The outlook is negative.

According to Moody's, the downgrade reflects expectation that ongoing significant declines in advertising revenue will continue to pressure EBITDA, leading to an increase in leverage and heightened risk of a credit facility covenant violation.

The agency said it expects McClatchy's free cash flow generation and modest bank leverage to allow it to obtain an amendment if necessary, but an increase in the interest rate spread and tighter non-financial covenants are likely to result, which would reduce financial flexibility.

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