Thursday, October 2, 2008

The Newspaper Fundamentals Remain Sound - Not

The air is getting thinner and thinner for newspapers in the economic debacle we are living, or I should say trying to survive. As if we hadn't already guessed this, Wall Street is saying that the downturn (now there's a euphemism) has further weakened newspapers. Hey, join the club. My financials are so weak, I can barely get out of bed.

Gannett had to tap its credit line of about $4 billion because short-term financing has dried up. Standard and Poor's credit rating agency put Gannett on its credit watch list for a potential downgrade, even though Gannett said it still had a substantial sum left on the $4 billion credit line. Then Gannett Chairman, President and CEO Craig Dubow said in a statement one of the most tone deaf things you can possibly say in these economic times, "Our underlying fundamentals remain strong..."

Geez. Where have we heard that before? And how much credibility do the orignal folks who uttered these infamous words have left? Just asking.

Star Tribune, owners of the Minneapolis Star Tribune, skipped its quarterly $9 million debt payment recently because it needed to conserve cash. (I'd like to try that trick some day.) It missed a debt payment in June as well. Bankruptcy may be waiting in the wings.

McClatchy, who bought out Knight Ridder and now publishes the Miami Herald, got ahead of everybody last week and renegotiated its $1.75 billion in bank loans (its total debt is higher). The price? Higher interest rates on the loans and a potential scaling back of its credit line. The company also has to cap its dividend payout, which will help it conserve cash. McClatchy could pay anywhere from $3 million to $11 million more a year in interest. Not quite sure which is better: paying the quarterly debt payment or paying higher interest?

That brings us to Tribune, which has been quiet lately. However, rising interest rates on its debt could cost Tribune as much as an extra $100 million more a year. That's what Wall Streeters are saying. Tribune also is getting closer to violating a requirement that it keep its debt under nine times its cash flow. The Wall Street Journal reported this week that the ratio was 8.3 at the end of June. Tribune is betting that the sale of its Chicago Cubs will help it meet the next debt payment of $1.4 billion next summer.

But in a way newspapers are actually fortunate. Yes, lucky. Newspapers prospects stink so badly that no bank is likely to be so foolish as to step in and take over a newspaper. That would be like shooting itself in the head. Who would buy a newspaper these days?

Those of you who still earn a paycheck from newspapers can sleep a tad -- but only a tad -- more soundly, knowing that there's little risk that you'll show up one morning and find that a bank has taken your computer.
However, it's still possible you may show up to work one day soon and find a pink slip attached to your monitor.

No comments: