Moody's downgrades Postmedia's debt

TORONTO -- Moody's Investors Service has further downgraded its ratings for Postmedia (TSX:PNC.A), the country's largest newspaper chain, citing concerns over refinancing of the company's debt.

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"Postmedia's results following its April 2015 acquisition of the Sun Media assets have been worse than we expected," Peter Adu, an analyst with the debt rating agency said in a release Friday.

"The downgrade was a result of our lack of confidence that the company will be able to refinance its 2017 and 2018 debt maturities at par."

The various downgrades included switching its corporate family rating to Caa2 from B3. Both are considered speculative grade under the Moody's rating system.

Moody's said the Caa2 CFR rating "primarily reflects substantial refinancing risk in 2017 and 2018 caused by a combination of high leverage ... high business risk from a continuing steep revenue decline from its traditional Canadian newspaper business and weak ability to generate replacement revenue from digital content."

Moody's said the ratings could be downgraded further "if it is highly likely the company will default on its debt obligations" while a ratings upgrade would be considered "if the company successfully refinances its debt maturities at par, demonstrates improvement in liquidity, and stabilizes revenue."

Earlier this week, the struggling chain announced plans to cut about 90 jobs while merging newsrooms in four cities across the country. With the acquisition of the Sun chain, the company now owns two newspapers in Ottawa, Calgary, Edmonton and Vancouver.

Earlier this month Postmedia announced it now is aiming for cost reductions of $80 million by mid-2017 -- up from its previous goal of $50 million in cuts.



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