Moody's rates Gannett notes, loans Baa3

Moody's Investors Service said it confirmed Gannett Co., Inc.'s Ba1 corporate family and probability-of-default ratings and Ba2 (LG5, 87%) unguaranteed senior unsecured notes, assigned Baa3 (LGD3, 36%) ratings to Gannett's senior unsecured guaranteed bank facilities and guaranteed senior unsecured exchange notes due 2015 and 2016 and upgraded its speculative-grade liquidity rating to SGL-3 from SGL-4.

This concludes the review for possible downgrade begun on April 20, and the outlook is negative.

The agency said the rating confirmations reflect Gannett's continued meaningful free cash flow generation. Gannett's local media properties are vulnerable to media fragmentation, Moody's said, but its scale within its markets, diversity of assets that includes some meaningful digital properties, good cost control and ability to leverage the infrastructure of multiple media properties within local geographic regions nevertheless distinguish it from smaller local media operators.

The upgrade of the speculative-grade liquidity rating reflects Gannett's very good internal liquidity and modest expected cushion within its financial maintenance covenants over the next two years, the agency said.

The negative outlook reflects Gannett's elevated debt-to-EBITDA leverage for the rating (approximately 4.1 times for the last 12 months ended June 28) and the potential that a deeper or more prolonged downturn not counterbalanced with cash saving initiatives could heighten the risk of a covenant violation over the next 24 months, Moody's said.

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