Fitch downgrades Tribune, rates loan BB

Fitch Ratings said it assigned a BB/RR2 rating to Tribune Co.'s new senior secured credit facility and downgraded the company's issuer default rating to B+ from BB-, senior unsecured notes to B-/RR6 from BB- and subordinated exchangeable debentures due 2029 to CCC+/RR6 from B+.

The ratings remain on Rating Watch negative.

The agency said the downgrade reflects the significant debt burden the company's two-step public-to-private transaction will place on Tribune's balance sheet while its revenue and cash flow have been declining. Fitch believes that newspapers and broadcast affiliates face meaningful secular headwinds that could lead to more cash flow volatility in the future, and with fixed charge coverage estimated to be below 1.3x, there is very little room to absorb declines in EBITDA.

Fitch estimated that pro forma for the first step, funded debt will be about $9.5 billion and the debt-to-EBITDA ratio will be about 7x. Pro forma for the second step, funded debt will be about $13 billion and the debt-to-EBITDA ratio will be 9x to 9.5x.

If the transaction is completed as planned, Fitch said it will likely downgrade the issuer default rating to B- from B+, senior secured revolver to B/RR3 from BB/RR2, senior unsecured notes to CCC/RR6 from B-/RR6 and subordinated exchangeable debentures due 2029 to CCC-/RR6 from CCC+/RR6.

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