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NEW YORK (AFX) - As expected, Standard & Poor's Ratings Service downgraded McClatchy Co.'s credit rating Wednesday, a day after the newspaper company completed its acquisition of Knight Ridder Inc. for about $6.1 billion.
The agency lowered McClatchy's rating one notch to 'BBB' from 'BBB+', which is still investment grade.
S&P said McClatchy's outlook is stable, and that it had removed the ratings from CreditWatch, which it said indicates no further downgrade is expected in the near term.
The ratings agency also affirmed a 'BBB' rating for McClatchy's new senior unsecured debt, and withdrew ratings on its old credit facility.
S&P said McClatchy is a stronger business following the deal, and it expects the company to use most of its discretionary cash flow to pay down its approximately $4.7 billion of outstanding debt in the coming years.
McClatchy will also use proceeds from sales of 12 Knight Ridder papers, an estimated $1.4 billion, to pay down debt.
Still, S&P said, the company's financial position is weak for the ratings, noting that the buyout substantially increased its debt.
S&P also lowered ratings on Knight Ridder's senior unsecured debt to 'BBB' from 'BBB+', and removed the company from CreditWatch. The agency withdrew Knight Ridder's corporate credit and commercial paper ratings.
McClatchy closed up 70 cents, at $39.70, on the New York Stock Exchange. Copyright 2006 Associated Press. All rights reserved. This material may not be
Copyright 2006 AFX News Limited. All Rights Reserved.
