(The following was released by the rating agency)
SYDNEY (Standard & Poor's) Dec. 17, 2012--Standard & Poor's
Ratings Services said today that its ratings and outlook on
Fairfax Media Ltd. (BB+/Negative/--) were not immediately
affected by the company's announcement that it will sell its 51%
ownership in New Zealand-based Trade Me Group Ltd. (Trade Me;
Fairfax expects to receive gross sales proceeds of A$616
million, which will be applied to reduce debt. Although the sale
will facilitate a material reduction in the group's debt levels
and improve liquidity, rating stability remains reliant on
Fairfax successfully addressing the key structural challenges in
its core publishing operations.
This will be critical to maintaining our "fair" business
risk profile assessment on the group, particularly given Trade
Me represented an attractive and high growth part of the group's
operations. In this regard, key factors for assessing the
group's success in addressing these structural challenges will
include the introduction of an effective online pay model for
its metropolitan mastheads, together with reducing the cost base
of its structurally declining metropolitan print operations in a
timely and effective manner.
As a result of the Trade Me sale, we have revised our
forecast EBITDA (from continuing operations) for year ending
June 30, 2013, to A$315 million-A$335 million, from A$410
million-A$430 million. We believe if Fairfax can effectively
execute its cost reduction programs, and revenue in its metro
newspaper business does not fall rapidly, it will continue to
generate sufficient free-operating cash flow (after capital
expenditure) to maintain fully adjusted debt to EBITDA (from
continuing operations) of about 2x in the next two years.
We consider these financial ratio expectations, together
with a fair business risk profile, as consistent with the 'BB+'