S&P cuts Tribune's ratings deeper into junk

NEW YORK, Nov 11 (Reuters) - Standard & Poor's on Tuesday cut its ratings on Tribune Co TXA.N deeper into junk territory, citing concerns that financing difficulties could limit the proceeds the publisher makes from asset sales, as well as delay the receipt of any funds.

Tribune is selling assets to help pay down debt. People involved with the sale of the Chicago Cubs baseball team said last month that a sale may be delayed by the global financial crisis unless Tribune is willing to accept a lower price for the baseball team. For details, see [ID:nN10343568]

"We had previously expected proceeds of $1 billion or more by the end of 2008 to repay significant additional debt balances," S&P said in a statement. "We now believe that proceeds could be significantly below this amount and that the company will not likely receive them this year."

S&P cut Tribune's corporate credit ratings two notches to "CCC," eight steps below investment grade, from "B-minus." It also cut the company's senior and subordinated bonds two notches to "CC," 10 steps below investment grade and a deeply speculative level, from "CCC."

The outlook is negative, indicating additional downgrades may be likely over the coming one-to-two years.

Tribune is also suffering from a worsening operating environment, with its revenue declining 11 percent in the third quarter of 2008, S&P said.

"As a result, Tribune may not generate additional asset sale proceeds for debt repayment over the near term at levels sufficient to avoid a near-term covenant violation, given the rapidly weakening economy's significant negative impact on newspaper and broadcasting ad revenue," the rating agency said.

The company's long-term viability relies on its reducing its leverage, which in September stood at more than 11 times debt to earnings before interest, taxes, depreciation and amortization, or EBITDA.

"Leverage levels are high enough, and expected EBITDA declines large enough, that Tribune is unlikely to continue to service its current capital structure over the intermediate term, even with significant asset sales," S&P said. (Reporting by Karen Brettell; Editing by Dan Grebler)