Moody's drops MediaNews to Caa3

Moody's Investors Service said it downgraded MediaNews Group, Inc.'s corporate family rating to Caa3 from B3 and probability-ofdefault rating to Caa3 from Caa1, reflecting concern that the downturn of the company advertising sales will be significantly more protracted than anticipated, further straining the company's liquidity profile and heightening the probability of a covenant default.

The agency lowered the senior secured term loans and revolving credit facility to Caa2 (LGD3, 32%) from B1 (LGD2, 18%), 6 3/8% senior subordinated global notes due 2014 and 6 7/8% senior subordinated global notes due 2013 to Ca (LGD5, 86%) from Caa2 (LGD4, 69%).

The outlook remains negative.

The downgrade reflects continued softening of the company's performance and a significant weakening in its liquidity profile, according to the agency.

The Caa3 rating reflects MediaNews' heavy debt burden, leverage in excess of 8 times debt to EBITDA at the end of September and the weak level of debtholder protection indicated by current newspaper valuation multiples, the agency said.

The rating is supported by the diversification of MediaNews' geographic and customer base, the reputation of its mastheads and the continuing support provided by its largest partner Hearst Corp., Moody' said.

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