Moody's rates new MediaNews notes B2

Moody's Investors Service said it has assigned a B2 rating to MediaNews Group Inc.'s new $300 million senior subordinated notes due 2013 and a confirmed all existing MediaNews ratings.

The ratings confirmation affects the company's B2 rated $300 million of 8.75% senior subordinated notes due 2009 and $200 million 8.625% senior subordinated notes due 2011.

Moody's said it has not assigned a rating to MediaNews's proposed $600 million senior secured credit facility.

The outlook has been changed to positive from stable.

Moody's said the ratings reflect MediaNews's high financial leverage (estimated at about 5.5 times debt to proportionate EBITDA); the potential for further acquisitions (following its recent unsuccessful bid for Freedom Communications); and vulnerability to soft print advertising spending and gradual circulation count slippage.

The ratings are supported by the leading position enjoyed by MediaNews in its markets, either by itself or as a joint operating agreement partner; the demographic growth potential, especially in its California, Colorado and Utah markets; the ability to largely withstand market slowdowns in newspaper advertising spending as recently evidenced; and relatively strong asset value coverage.

Moody's said the change in outlook to positive from stable is predominantly reflective of MediaNews's positive cash generation, which has been used in part to reduce debt. The positive outlook also signals Moody's expectation that the company is on track to further reduce leverage over the intermediate term.

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