S&P rates new MediaNews notes B+

Standard & Poor's said it assigned its B+ rating to MediaNews Group Inc.'s planned $300 million senior subordinated notes due 2013 and affirmed the company's B+ subordinated debt ratings. The outlook is negative.

Proceeds will be used to repurchase or redeem the outstanding $300 million 8.75% senior subordinated notes due 2009.

S&P said the ratings on Denver-based publisher MediaNews (successor issuer to Garden State Newspapers Inc.) reflect the company's heavy debt levels, attributable to its growth over the years through acquisitions.

Debt to net EBITDA (EBITDA available to MediaNews) is in the mid-5x area and net EBITDA to interest is in the mid- to high-2x area. While still weak for the ratings, the company's overall financial profile is improving, aided by higher net EBITDA, lower debt levels, and reduced interest expense.

The company is subject to the effect of general economic conditions on advertising revenues. However, this is tempered by MediaNews' well-positioned and geographically diverse newspaper operations, which help to provide more revenue and cash flow stability in the event of a regional downturn. In addition, with operating cash flow margins in the 20% area, moderate capital expenditures, and limited cash taxes, the company generates meaningful levels of free operating cash flow. These funds have been used for debt reduction and acquisitions.

At September, the company had about $7 million in cash and about $116 million available under its secured revolving credit facility expiring in June 2006. In addition to its internal cash generation, the company has numerous and saleable businesses.

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