Moody's downgrades Ziff Davis

Moody's Investors Service said it downgraded Ziff Davis Media, Inc.'s corporate family rating to Caa3 from Caa1, probability-of-default rating to Caa3 from B3 and $205 million first-lien floating-rate notes due 2012 to Caa1 (LGD2, 29%) from B3 (LGD3, 43%). The speculative grade liquidity rating remains unchanged at SGL-4.

The outlook is stable.

The downgrade reflects Moody's view that Ziff Davis could face a near-term default on its debt obligations, absent a waiver from its bondholders. In addition, Moody's considers that a sale of assets or a restructuring of Ziff Davis' balance sheet could result in compromised recovery to the company's debtholders, especially to holders of its $152 million unrated compounding notes, which require cash interest payments starting in February, and parent company Ziff-Davis Holdings, Inc.'s $971 million unrated mandatorily redeemable preferred stock.

At the end of September, the company reported consolidated cash of $11 million and said it expects that cash on hand and cash generated from operations will be sufficient to meet its liquidity, working capital and capital spending needs, including the next coupon payment due February. The agency said it is unclear, however, that the company will have sufficient funds to make subsequent payments.

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