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.
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.