Moody's confirms Gatehouse

Moody's Investors Service said it confirmed GateHouse Media Operating, Inc.'s B1 corporate family rating, B2 probability-of-default rating and B1 (LGD3, 35%) senior secured credit facilities following the company's announcement that it successfully completed a common stock offering with net proceeds of $330 million and that it agreed to sell the Herald Dispatch for $77 million.

This concludes the review for possible downgrade begun on March 16 following the company's announcement that it agreed to acquire 9 publications from the Copley Press, and the outlook is stable.

Gatehouse plans to use combined net proceeds of the stock offering and the Herald Dispatch sale to fully repay its $300 million bridge loan and to repay $77 million under its term loan.

The confirmation reflects Moody's expectation that GateHouse's leverage, coverage and liquidity metrics will not be materially impacted by the two recent acquisitions. The agency said the ratings continue to reflect GateHouse's high leverage, the acquisitiveness of its management team, its vulnerability to spending on print advertising, overall declining circulation trends for its newspapers, the impact of rising newsprint costs and the limited growth prospects of the newspaper publishing industry.

The ratings are supported by the defensibility and diversification of GateHouse's community newspaper model, the longstanding reputation of its newspaper titles, the company's proven ability to access the U.S. equity markets and barriers to competitive entry, Moody's said.

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