S&P downgrades Ziff Davis Media

Standard & Poor's said it lowered Ziff Davis Media Inc.'s corporate credit and senior secured debt ratings to CCC from CCC+ and subordinated debt rating to CC from CCC-. The outlook is negative.

The downgrade reflects deteriorating profitability, rising debt levels and S&P's concern about the company's near-term earnings outlook and strained liquidity. The onset of cash interest payments in February 2007 on the company's $160 million principal amount 12% compounding notes due 2009 will exacerbate its already negative discretionary cash flow and liquidity, unless profitability improves significantly in the near term.

S&P said these risks are not meaningfully offset by Ziff Davis' established position in the computer and electronic game magazine publishing industries.

Total debt to EBITDA rose to 20.7x in 2005 from 8.8x in 2004 due to higher debt and lower EBITDA, the agency said, and EBITDA coverage of total interest expense was only about 0.5x in 2005.

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