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NEW YORK — Standard & Poor's Ratings Services on Friday slashed its corporate credit rating on newspaper publisher McClatchy Co. four notches deeper into junk territory after the company offered to buy back $1.15 billion in debt at a fraction of face value.
The ratings agency cut the corporate credit rating and secured debt rating to CC from CCC+, a four-level downgrade to just three steps away from a default rating. The outlook for the corporate credit rating is negative.
On Thursday, McClatchy said it is asking its lenders to forgive a significant amount of debt.
The company is offering to pay $60 million in cash and issue $175 million in new notes, with a 15.75 percent interest rate, to replace $1.15 billion in debt owed to its bondholders.
Assuming McClatchy will be able to pay back the $175 million in new notes when they come due in 2014, the Sacramento-based company would be paying the bondholders about 20 cents on the dollar.
The ratings agency put a CCC- ratings on the new notes.
"The rating downgrades reflect our view that the exchange offer is tantamount to a default," the agency said in a statement.
If the debt-for-debt swap succeeds, Standard & Poor's analyst Emile Courtney said the corporate credit rating would not rise higher than CCC+, "until we are confident that there is a substantial and sustainable moderation in the rate of decline in newspaper advertising revenue at the company."
However, Courtney said if the exchange succeeds, McClatchy "would have greater capacity to weather the current downturn over the next several quarters."
On Thursday, Fitch Ratings also cut its ratings on the company, paring McClatchy's issuer default rating to C from CCC.
McClatchy shares rose 9 cents, or 11 percent, to close at 91 cents on Friday.
