Moody’s thumbed through the newspapers of the United States on Monday and concluded what many of us know: the outlook is negative. The summary: ad revenue falls, less money comes in, newspapers have to cut back to survive and it gets harder to pay their debt.

Having said that, this newspaper beat reporter found signs of a thaw, just like a crocus peeking through snow.

First, the negative:

The negative outlook for newspaper-ad revenue has worsened in the past six months as bleak data on the economy mounts, says Moody’s. Rising job losses, the weak housing market and tighter credit availability raise concerns that consumer spending will weaken further, extending and deepening the economic downturn.

The positive:

In addition, default risk is high for highly leveraged newspaper companies, says [Moody's Senior Analyst John] Puchalla, “although we expect some newspaper publishers to default in 2009, the ones that do are most likely to restructure their debt, rather than close shop.

And the really positive:

Longer term, Moody’s believes the industry will eventually deleverage, either by reducing debt with free cash flow or by way of bankruptcy filings. At that point, debt will likely stay at lower levels to make the industry a viable one.

And in a footnote, I talk a lot to reporters and editors who think that the financial analysts and other Wall Street denizens who essentially control their newspapers’ fortunes are a bunch of coldhearted Scrooges who know nothing of, and care even less for journalism.

Not Moody’s!

[A] more enduring operational legacy of the current downturn could be the damage done to newspaper brands through newsroom cuts, says Moody’s. Companies are trying to reduce costs without cutting back the staff that creates the core product, but a very weak revenue environment could make that difficult.

And in related news, Citi likes The New York Times Co better than it used to. It now rates NYT stock a “hold” — up from “sell.”

NYT management yesterday took the necessary step of cutting the dividend to $.06 from $.23/qtr, representing a 4.6% yield, and freeing up almost $100mm in annual cash flow. Together with other
liquidity steps alluded to (lower capex, asset sales), NYT should be able to adequately fund itself for next four quarters.

Lest everyone get too happy about this, Citi cautions that the NYT probably will have to do some more fancy footwork in the borrowing department once 2009 nears and end.