Newspapers Stabilize; Industry Still 'Moody'

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Advertising revenues in the newspaper industry may rebound in 2011, according to Moody's Investor Services, which cautioned that long-term problems plaguing the industry could darken the forecast.

Moody's, a credit agency firm, anticipates newspaper advertising may continue to decline by 5 percent to 10 percent in 2010, but could level off in 2011 and possibly even increase 2 percent.  Declining revenues, decreased circulation, and  shutdowns have dogged the industry over the past year-and-a-half and caused Moody's to rate newspapers at the junk level.

The mildly positive outlook by Moody's was tempered by the expectation that advertisers will continue to defect from newspapers to other media, such as the Internet.

Moody's Gives GateHouse Media the Gate--Downgrades Credit Rating

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GateHouse Media Operating, Inc., the Fairport, N.Y.-based media conglomerate's holdings include 90 daily newspapers, 289 weeklies and 115 "shoppers," but Moody's Investors Service is unimpressed.

Characterizing GateHouse's overleveraged capital structure as "unsustainable," Moody's downgraded the company's credit ratings, dropping the "corporate family rating" to Ca from Caa1 and its "probability of default" rating to Ca from Caa2. Citing  GateHouse's $1.2 billion debt, Moody's suggested a pre-packaged bankruptcy filing or a distressed exchange (debt buy-back at way below face value) may be in the offing in 2010.

GateHouse, which is principally owned by the Fortress Investments Group private equity firm, has dropped its dividend and earlier this year was delisted by the New York Stock Exchange.