The newspaper industry was hit with another downgrade today, astonishing because almost all of the stocks in the sector are at 52-week lows.
Wachovia cut its ratings on several chains including Gatehouse (GHS), McClatchy (MNI), Gannett (GCI), Lee (LEE), and The New York Times Company (NYT). According to the AP, "Analyst John Janedis expects total ad revenue to fall 10.4 percent in 2008 and 6.5 percent next year."
That kind of fall-off in revenue could be enough to undermine the ability of several of the debt-laden companies in the group to make interest payments.
It is now very likely that several of the companies in the sector will have to begin selling off properties by the end of the year. The firms may not be able to raise enough money to cover the entire amounts they have borrowed. That will leave their lenders hold the bags.
Douglas A. McIntyre