"Moody's expects that Gannett's ongoing efforts to reduce costs and debt will not fully offset what is likely to be a deeper revenue decline in 2009 than in 2008," analyst John Puchalla wrote, according to Reuters.Lower debt ratings often increase borrowing costs -- not something GCI needs right now. The Moody's decision follows a similar move by rival Standard & Poor's early last month. Reuters notes that ratings agencies have soured on the debts of several publishers, including the New York Times Co., as their ad revenue declines.
Why do they keep the dividends the same if debt is a problem?
ReplyDeleteKeeping the dividends high is one of the few things CEO Craig Dubow can do to keep major investors happy -- and so keep his job.
ReplyDeleteJim, could you give us a business-for-dummies rundown on what factors are bad and what factors are good?
ReplyDeleteDitto 9:14's request.
ReplyDeleteI don't even know who the bond holders are or why they should care about the downgrade.
9:14 am: I'd like to help, but I don't know what you mean by "factors."
ReplyDeleteBad factors:
ReplyDeleteDeclining revenues
Declining advertising pages
Increased newsprint costs
Declining circulation
Increasing FTE costs
Broken business plan
Good factors:
Recognized brand
Monopoly position in most markets
Is downgrading two notches at a time typical?
ReplyDelete9:14 here -- When they announce layoffs, the stock goes up ... for a millisecond. When Dubow announces a pay freeze, the stock goes up ... for a millisecond. They've been cutting and slashing for months, and yet the stock gets downgraded.
ReplyDeleteBusiness-wise and investor-wise, what is Gannett doing wrong? What steps would help? And why?
Am I asking for too much? :P
@8:30 p.m.:
ReplyDeleteThe only thing that would get the stock price moving north again would be evidence that revenues will improve at some time in the foreseeable future. No such evidence exists.
GCI, and other news companies, have proven they can get profits out of any revenue stream, but if the stream is running dry .... well, you've heard about turnips and blood.
All the analysts who deal with news outlets say the outlook is dim with no sunrise in sight -- even if the overall economy stabilizes and starts to inch back into growth.
So: It's going to get worse for some unknown amount of time before the signs look good again.
Could be that all those new digital sales specialists will turn out to be the critical factor that makes the numbers start going up again. Let's hope.
ReplyDeleteThen there is ALL THAT DEBT.
ReplyDeleteGannett has bought everything it ever wanted ... newspapers, dot.com companies, real estate ... always piling debt on top of dept. This likely was OK back in the 25% profit days, but it has to be a total drag now.
So does it make sense for Gannett to unload properties to reduce debt or to buy properties (or shares of properties) to increase opportunities for making a profit?
ReplyDeleteIf they were to sell off stuff, would that make them look bad in the eyes of the shareholders?