Wednesday, September 22, 2010

Urgent: GCI shares tumble 6% on debt news

Gannett's stock closed moments ago at $12.36, down 81 cents, or 6.2%, as Wall Street appeared to give a thumbs down to the company's plans to issue $500 million in new debt, plus its disclosure today that it had extended the maturity on a crucial revolving credit agreement.

GCI's drop also came after the New York Times Co. offered investors a less-than-rosy forecast this morning for its third-quarter earnings.

Newspaper publishing stocks overall ended the day lower. The Dow Jones Industrial Average and the S&P 500 index both closed down far less than 1%.

Amid the investor reaction, Moody's credit rating service gave GCI's debt developments a positive reception. Also, Standard & Poor's rating service upgraded GCI's debt rating, as well.

GCI's stock has still outperformed the S&P 500 index over the past year, but its lead is growing more narrow. Shares are now up 22% from a year ago vs. 5.8% for the S&P. At one point earlier this year, however, GCI was up more than 400%.

13 comments:

  1. What's the positive reception Moody's gave GCI on the debt restructuring announcement? Well, if you read it closely, it is that Moody's didn't give the proposal any worse rating than its lowest (and most precarious) junk bond rating. That's damning with faint praise, as far as I see it. The stock market response is more telling

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  2. This looks to me like a HUGE change of course and I'm wondering why would they do this?
    Just three months ago in Hollywood, Fl., Gracia boasted about how GCI had driven down debt.
    http://www.gannett.com/news/pressrelease/presentations/noble10/GM.htm
    Now we are restructuring the debt and taking on another $750 million. It makes no sense, unless the third quarter results are far much worse than we suspect and they need a cash cushion.
    The ratings they got on the debt shows they are going to be paying a huge interest premium, because the debt has such a low junk bond rating. But again, look at Gracia's presentations over the last year where she has boasted about the low interest rates GCI has on its debt.
    Anyone have any suggestions what is going on here?

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  3. "Oh shit Gracia...now our stock options are underwater again"...a very senior member of the GMC

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  4. I believe the stock plunge is reflective of the New York Times earnings report out late yesterday, not the corporate announcement of a new debt offering. The fact that Gannett is able to continue to pay down debt in a lousy business environment is a positive, not a negative, and its a continuation of the effort management has made to dig itself out of the huge hole Doug "spend 'em high on premium priced acquisitions" McCorkindale burdeoned the company with before leaving. Gannett shares are still in a precarious spot and about as warmly received as PCBs in Love Canal, but its wrong to tie the stock price plunge to the debt offering.

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  5. 1:11 If you were right, then other newspaper stocks would have gone down sharply as well. Didn't happen. The market took Gannett's move incredibly negatively.
    P.S. Read the release. GCI is not "paying down debt." To the contrary, it is taking on new debt.

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  6. From another post on a preious thread on the same subject:

    Anonymous said...
    Gosh 11:48 you obviously have no clue how high finance works. Love Gannett or hate it this a stunningly art move. It's business lemmings. Maybe you should take a finance class.

    9/22/2010 11:03 PM
    ____________________

    Come on you idoits. This isn't taking on more debt. It is moving around debt for more favorable conditions.

    Apparently Jim received too many positive comments and began another thread hoping to garner more negative support.

    More crap flinging I am calling you on.

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  7. An experienced Banker9/23/2010 6:06 AM

    Gannett is going bankrupt. They are issuing more debt than they are increasing their earnings. Almost 5 times more debt than new incremental earnings. Not a good sign.

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  8. 7:08 Why would they do this? Perhaps to raise money for a pending purchase? Since Dubow has been off strategizing, perhaps he was hit with the bright idea of the century, involving the purchase of some startup company that will save GCI's fortunes. Or, perhaps GCI is going to bid for the Philadelphia papers in the bankruptcy court auction, and merge them with Cherry Hill.

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  9. 7:08

    I've been keeping my eye on that situation for a long time. And it's very plausible. But Cherry Hill? I don't think so. That place is a big mess. Try Wilmington. It's less of a mess. Delaware also has better corporate tax, and legal policy, the cost of living index is lower, and the facility is about 50% utilized. Not to mention... the head of the east group sits there, and it will be the new east group marketing hub. If this actually happens. Look for it to happen in Wilmington.

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  10. "Lenders" won the auction of the 2 Philly Newspapers

    http://nab.broadcastnewsroom.com/articles/viewarticle.jsp?id=1210949

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  11. Hmmmm. What would "lenders" want with a newspaper?

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  12. Bankruptcy speculation is plain silly, but I am still puzzled about what has happened here. About the only thing that makes sense is some sort of purchase is in the works, and they are putting the money together. I don't think it is a newspaper because management is down on newspapers. Maybe some technology company like Ripple 6?

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  13. because buying tech companies has worked real well for them? Gannett digital is a joke. It pretty much looks like they chugged a handle of e-vodka and puked all over the company. Just look at the daily sites. Atrocious. Ridiculous. Just plain awful. Absolutley zero synergy or product continuity. When are these people going to wake and realise they aren't an internet company. They're a content company. They should focus on what the do (did) best. make news. If you've got a good product and know how to market it. people will by it.

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Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

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