Wash Post Co. Gets Reality Check on Credit Rating

With everything going on in the credit markets lately, this is hardly an ideal time to have the quality of your debt challenged, but that's exactly what happened to the Washington Post Co. yesterday when both Moody's and Standard and Poor's revised the ratings outlook for the publisher from stable to negative. The changes didn't affect the company's current ratings -- which Editor & Publisher characterizes as "stellar," in marked contrast to most other newspaper owners' -- but merely expressed a view that a downgrade could be on the horizon.

Moody's explained its thinking this way:

The negative rating outlook reflects Moody's concern that acquisition activity over the next several years -- including the pending purchase of Miami's NBC affiliate -- could sustain leverage at levels that are already weak for the A1 rating. Moody's anticipates growth in the Kaplan education and CableOne cable television business will mitigate some of the secular and cyclical pressure in the traditional media properties over the next several years, but that earnings growth might not be sufficient to return leverage to the levels appropriate for the A1 rating.

Moody's also warned recently that The New York Times Co. is in danger of having its unsecured debt and commercial paper downgraded to junk status if cash flow doesn't improve soon.