Fairfax credit rating downgraded

Advertising revenue migrating from print to online is challenging Fairfax's traditional business

Fairfax Media Ltd says it's disappointed ratings agency Standard & Poor's (S&P) has decided to downgrade its credit rating, saying it is confident of weathering the economic downturn.

S&P has lowered the group's rating from BBB minus to a sub-investment grade BB-plus, with outlook stable, from from BBB-minus.

The agency said the downgrade reflected the continuing deterioration of Fairfax's advertising earnings.

"Although Fairfax's credit metrics have benefited from an equity issue and assets sales, the weaker earnings outlook for the remainder of calendar 2009 has resulted in underlying credit metrics for the company moving outside tolerances for the BBB- rating," credit analyst Peter Sikora said.

Fairfax chief executive Brian McCarthy said while the company was disappointed with the re-rating it was confident that it would weather the current economic conditions.

"The company remains comfortably within its various financial covenants," McCarthy said.

He said due to the credit rating change, some margins under certain financing facilities would increase with a consequential increase in net interest expense of about A$10 million in the 2010 financial year.

S & P's Sikora said the downgrade comes at a time when Fairfax's business are facing structural challenges as advertising revenues migrate from traditional newspapers to the internet.

He added that the stable rating outlook reflected an expectation that Fairfax would continue to maintain adequate headroom in its financial covenants on borrowings.

On Tuesday, Fairfax forecast a 26.2 per cent fall in earnings for this financial year amid concerns that the advertising downturn was showing no sign of recovery.

Fairfax shares fell 6.98 per cent or 7.5 cents to $1.00 by 1241 NZT.


AAP