Bonds News

S&P may cut Gannett into junk territory

NEW YORK, Jan 30 (Reuters) - Standard & Poor's said on Friday it may cut its ratings on Gannett Co GCI.N into junk territory, citing concerns about the newspaper publisher's revenue and earnings declines.

The largest U.S. newspaper chain and publisher of USA Today on Friday reported a 36 percent drop in its profit for the fourth quarter and said it plans to write down the value of its newspapers by up to $5.2 billion. For details, see [ID:nN30357637]

Declines in revenue and earnings before interest, taxes, depreciation and amortization may not moderate enough over the intermediate term for Gannett to maintain its investment grade rating, S&P said.

A downgrade into junk territory can significantly increase a company’s borrowing costs.

“Our main concern is the accelerating quarterly pace of decline in Gannett’s publishing segment,” S&P said.

“However, we believe the company’s broadcasting segment may experience revenue declines in 2009 near that of publishing, mostly due to the U.S. economic recession and the absence of Olympic and political ad revenue that benefited periods in 2008,” the rating agency added. (Reporting by Karen Brettell; Editing by Dan Grebler)