McClatchy Stock Plunges 30 Percent For All-Time Low
This story was written by David Kaplan.
The McClatchy (NYSE: MNI) Company's stock ended down again on Thursday, finishing at $1.05. That's a 30 percent decline and a new low for the newspaper publisher's share price, coming just days after Monday's announcement that November total revenues fell 19.4 percentwith ad revenues plummeting 22.4 percent. Except for online ad dollars' 10.6 percent rise, last month was even more dismal than usual. For example, McClatchy's help-wanted ads cratered, dropping 51.8 percent, and real estate dropped 40.1 percent.
Newspaper industry worries spread: Since Tribune Company filed for bankruptcy earlier this month, newspaper industry observers have been wondering, who's next? Speculation has swirled around McClatchy rivals like MediaNews Group, whose credit rating was downgraded by Moody's Investors Service to junk status last week over concerns about its ability to carry its $962 million debt rating. MediaNews CEO Dean Singleton insists that since most of the company's debt is owed to Hearst, which is one of its backers, the company doesn't face the same danger it would have if it was dealing with outside lenders. Additionally, an auditor's report raised the spectre of default on Lee Enterprises (NYSE: LEE), the publisher of the St. Louis Post-Dispatch, which has roughly $1.5 billion in debt related to its acquisition of Pulitzer Inc. three years ago. Lee is trying to get its creditors to waive potential violations of its lending terms on notes due next year.
Investors unsure about bankruptcy: After his appearance at the UBS Media Week conference this month, I asked McClatchy Chairman and CEO Gary Pruitt for his reaction to the Tribune bankruptcy. He declined to offer specifics, saying only that the situation was different. Benchmark Company analyst Edward Atorino told WSJ that McClatchy's stock plunge could mean that potential bankruptcy was on the minds of investors. At this point, it's critical that McClatchy demonstrates it has enough revenue and cash flow to meet its debt covenants. In September, the company renegotiated $1.175 billion of debt, which includes banks loans and available lines of credit, giving it a bit more flexibility, at least for the time being. Total debt was $2.07 billion at the end of Q3.
By David Kaplan