It's never a good sign when Standard & Poor's says it might downgrade a company's debt. But the ratings service's warning, disclosed yesterday, didn't seem to rattle Gannett investors too much. Nor did Gannett's announcement that it had tapped some of its $3.9 billion in revolving credit as other financing sources have dried up in recent weeks. Still, the developments opened a new front in the battle Gannett now faces in the mortgage-related meltdown of the credit markets.
The company said S&P's Ratings Services had placed its long and short term credit ratings on credit watch, with "negative implications." In other words, if GCI's financial situation worsens -- say, revenue falls even more -- S&P could judge Gannett a more risky investment. That would surely make it harder and more expensive to borrow money, because lenders would charge higher interest rates.
Gannett sought to reassure Wall Street. In a statement, GCI said it had partially drawn down on its "committed revolving credit facilities" enough money to cover all of its commercial paper obligations. "This action was taken prior to -- and was completely unrelated to -- Standard & Poor's actions today,'' the company said. “Our underlying fundamentals remain strong and we continue to be a solid investment grade company,” CEO Craig Dubow (left) said in the statement.
GCI's stock closed at $17.05, up 14 cents.
Gannett's announcement came against a scary backdrop: Wednesday, the Star Tribune said it skipped a debt payment as the Minneapolis newspaper tries to restructure $430 million in loans, The Wall Street Journal (paid subscription usually required) says. Publisher Chris Harte indicated the company is testing all options with its lender -- suggesting that a bankruptcy filing may not have been ruled out. Miami Herald publisher McClatchy agreed to pay higher interest rates last week in return for loosened debt restrictions, the WSJ says. Like Gannett, McClatchy has been hit hard by financial woes related to the housing bubble collapse, especially in Florida and California.
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