Capital Markets

S&P Cuts Tribune Credit Ratings to Junk

The media giant joins a growing group of spelunkers that have descended from investment-grade status.
Stephen TaubSeptember 22, 2006

Tribune Co. is the latest among a growing number of companies to see an investment-grade rating cut to junk-bond status. On Friday, Standard & Poor’s Ratings Services cut Tribune’s long- and short-term corporate credit ratings to “BB” from “BBB-” and to “B” from “A-3,” respectively. It also put its ratings on CreditWatch negative.

The media giant had about $4.9 billion of debt outstanding as of July 2006, according to the Associated Press. Tribune, which owns such newspapers as The Chicago Tribune and The Los Angeles Times,as well as the Chicago Cubs baseball team and a number of television stations, has reportedly signaled that it plans a major restructuring. The rejiggering could include the sale of some of the jewels in its crown or a decision to go private.

In May, the company reported it would use bank debt and publicly issued bonds to repurchase up to 75 million common shares, or about 25 percent of its total outstanding shares.

The downgrade is the most recent among a burgeoning group of issuers that have descended from investment-grade status. In a separate report earlier this month, S&P noted that the number of fallen angels — companies that have seen their credit ratings cut from investment-grade to junk — has continued to grow. Through September 7, the rating agency noted, 34 fallen angels with rated debt worth $39.6 billion have been recorded. That’s a rise of two from last month’s report.

“Fallen angels have overtaken rising stars by a margin of 13 entities in the year to date as of September 7, a reversal of the pattern seen in full years 2004 and 2005,” noted Diane Vazza, managing director and head of Standard & Poor’s Global Fixed Income Research.

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