S&P lowers American Media notes to D

Standard & Poor's said it lowered the rating on American Media Operations Inc.'s 8.875% senior subordinated notes due 2011 to D from CC and removed it from Creditwatch.

The corporate credit rating on the company remains SD, the agency said, adding that the rating on American Media's senior secured debt remains on Creditwatch with developing implications, where it was placed on Nov. 7.

The lower issue-level rating on the 8.875% senior subordinated notes reflects American Media's failure to make the Jan. 15 interest payment on the notes, the agency noted.

While a payment default has not occurred according to the legal provision of the notes, S&P said it considers it a default when a payment related to an obligation is not made, even if a grace period exists.

"Our downgrade conveys the view that the missed payment is a function of the borrower being in financial distress and that we are not confident the payment will be made in full during the grace period," explained S&P credit analyst Tulip Lim.

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