Moody's Investors Service on Friday downgraded the credit ratings of The New York Times Co. and McClatchy Co. on concerns that business will keep deteriorating as the newspaper advertising slump continues. Moody's cut the Times' corporate family rating, probability of default rating and senior unsecured notes one level to B1 from Ba3, the fourth-highest non-investment grade rating. About $370 million of debt is affected. Lower ratings raise a company's borrowing costs. The rating outlook is negative, meaning further downgrades are possible. Moody's said the newspaper ad downturn will continue to put pressure on the company's revenue and operating cash flow, as well as make it harder to maintain its debt ratio. Moody's expects the Time's earnings before interest, taxes, depreciation and amortization to fall by 35 to 37 percent this year, after buyouts. Modest improvement is seen for 2010. But the company's liquidity gives it flexibility and limited the downgrade to one notch. As for newspaper publisher McClatchy, Moody's downgraded the company's corporate family rating and probability of default rating two levels, to Caa1 from B2. Its senior secured bank credit facility rating was cut to B1 from Ba2 and senior unsecured notes fell to Caa2 from Caa1. The downgrades affect about $2.2 billion of debt. The rating outlook is negative. Moody's is concerned about Sacramento, Calif.-based McClatchy's debt level becoming "unsustainable" and it said there's a heightened risk that continued declines in revenue could make it breach debt covenants or trigger a restructuring over the next 12 to 24 months. Moody's expects McClatchy's EBITDA to fall by about 30 percent this year
