UPDATE 2-US newspaper chain Gannett cuts dividend 90 pct
*Cuts dividend to 4 cents/shr from 40 cents
*Cites global recession, tightening credit markets
*Will use $325 mln saved to pay down debt, seek growth (Adds details, background, after-hours share price)
LOS ANGELES, Feb 25 (Reuters) - Newspaper chain Gannett Co Inc (GCI.N) said on Wednesday it would cut its quarterly dividend by 90 percent, to 4 cents per share, in response to the global recession and tightening credit markets.
The largest U.S. newspaper chain and publisher of USA Today said it will use the more than $325 million in free cash flow savings to pay down debt and position itself to "seize opportunities for growth," Chairman and Chief Executive Craig Dubow said in a statement.
The dividend will be paid on April 1 to shareholders of record as of the close of business on March 6, the company said. The dividend in the previous quarter was 40 cents per share.
Gannett's debt rating has been hovering near junk status after it reported a 36 percent decline in advertising revenue in the fourth quarter. The lower debt rating can make it more expensive for Gannett to borrow money.
The move comes about a month after company executives said they would meet to evaluate the dividend.
It also follows dividend cuts from the likes of media giants CBS Corp (CBS.N) and the New York Times Co (NYT.N) as well as General Electric (GE.N) and JPMorgan Chase & Co (JPM.N), as corporations try to conserve cash amid a deepening U.S. recession now into its second year.
Newspapers and broadcasters have been especially hard hit by the downturn, as advertising revenue from retailers dries up and more consumers go online to get news and entertainment.
Gannett's share price has dropped 60 percent since January, following a series of announcements, including layoffs, unpaid employee furloughs, a $5.2 billion write-down of the value of its newspapers and a forecast for no near-term improvement in crucial auto advertising.
Shares of Gannett dropped 6.1 percent in light after-hours trade after closing down nearly 8.1 percent on Wednesday to $3.75 on the New York Stock Exchange. (Reporting by Gina Keating; Editing by Gary Hill and Carol Bishopric)
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