Gannett Gets Junked

Moody’s downgrades media empire following dividend cut
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(Feb. 26, 2009) McLEAN, VA.: Gannett’s debt is now classified as “junk” by Moody’s. The San Francisco investment service provider downgraded Gannett after the media company cut shareholder dividends by 90 percent, from 40 to 4 cents a share. The cut will save the company an anticipated $325 million, money it intends to use to pay down debt. It was the first dividend reduction in the company’s 41 years of quarterly payments, according to The Des Moines Register, a Gannett property.

Gannett’s (NYSE: GCI) senior unsecured notes were pegged Ba2, down from a Baa3. Its commercial paper dropped to Not Prime from Prime-3. Moody’s gave Gannett an overall Ba1 corporate probability of default rating, and an SGL-3 “speculative-grade liquidity” rating to the company.

Moody’s made the call on concerns about the imploding advertising market, particularly in newspapers, where GCI has a particularly strong footprint with 85 dailies and 900 non-dailies. Gannett shares reached a peak of $3.90 today before slipping to less than $3.60 on news of the downgrade.

Gannett released preliminary numbers for 2008 in late January. The 23 stations are expected to pull in revenues of $205.6 million for the final quarter of 2008, up 2 percent from the year before.