The company's stock traded recently for $3.20, down 14.9%, after Moody's warned it may downgrade Gannett's debt even deeper into "junk" territory. GCI has traded as low as $3.10 so far today. The ratings agency cited concerns that a continued advertising revenue slide could force Gannett to renegotiate loan agreements on $1.6 billion of its $3.7 billion in debt to avoid a default. "Moody's said the company's free cash flow and cost reduction efforts should help it obtain an amendment to its loans,'' the Associated Press says.Moody's warning followed Gannett's disclosure last week that net income plunged 60% in the first quarter on a 34% tumble in advertising sales.
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ReplyDeleteThe junk debt rating is another sad reminder of the doofus decisions made by former and current GCI leadership. Instead of using cash flow during the good times to lower debt, GCI bought back stock at now-laughable prices. Consumer products companies that have been around as long as GCI know that economies are cyclical. GCI should have smelled the boom times of 2002-2007 coming to an end. Instead it borrowed like a spendaholic with a credit card. GCI's directors should have seen it coming, too.
ReplyDeleteThe stock is actually holding it's own relative to the Dow. There were a lot of good stocks that lost more than GCI did yesterday. I would have thought this news would have had more of an impact.
ReplyDeleteI'm personally waiting for 1.8 to buy, and even then I might hold off. At $3.00 it's still overpriced considering the state of the industry.