McClatchy finances solid, analyst says – for now

McClatchy Company gets a pat on the back for its fiscal discipline in a report by Fitch Ratings that’s summarized on Editor & Publisher’s Fitz & Co. blog.

The analyst says the publisher’s slowing revenue declines, tight cost controls and debt repayment have “exceeded expectations” and should be able to cover interest and principal payments for debt maturing through 2014.

“However, Fitch does not expect McClatchy to generate enough free cash flow to pay off its debt maturities in 2017,” the report says. “Given the secular risk for the industry, Fitch’s concerns that online revenue is not growing at a pace to offset the print revenue declines, and with no clear visibility of when revenues will turn positive, Fitch continues to remain cautious of McClatchy’s ability to refinance its 2017 maturities, and over the long term, the company’s capital structure could still be untenable.”

McClatchy has repaid about $3 billion in debt since buying the old Knight Ridder chain in 2006, and has lowered costs dramatically – principally through layoffs, which continue at the Kansas City and Miami newspapers.

Fitch continues to give McClatchy a CCC credit rating, a speculative-grade or “junk” rating that suggests a “high default risk,” but says keep up the good work and they could move the company to B, a speculative-grade or “junk” rating that suggests a “high default risk.”

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