Gannett rating cut to junk as Philadelphia dailies combined

NEW YORK - USA Today-owner Gannett has had its debt rating cut to junk status while US newspaper industry woes continue, also forcing two Philadelphia dailies, the Daily News and sister paper the Inquirer to merge operations.

Read Gordon's Republic blog post - Newsday - beginning of the end for free content?

Gannett had its rating cut by credit ratings agency Standard & Poor, which cited the worsening prospects for newspaper advertising. Gannett reported a 36% fall in fourth quarter advertising revenues and it expects further falls in 2009.

It follows Gannett's announcement last week that it was cutting its dividend from 40 cents to four cents, saving the company $325m a year.

Standard & Poor said lenders in some quarters were in danger of recovering little of their investment if the company defaults on its debts.

The cut to junk status sent Gannett's stock down almost 10% to $2.92 yesterday, below the $3 mark for the first time since the newspaper industry crisis began.

S&P cut Gannett's corporate credit rating to 'BB' From 'BBB', which is its second-highest junk rating with a negative outlook.

The news came as Philadelphia Newspapers, which filed for Chapter 11 bankruptcy protection last week, announced it would publish its tabloid Philadelphia Daily News as an edition of sister paper the Philadelphia Inquirer in an effort to cut costs and present a united circulation to advertisers.

Mark Frisby, publisher of the Daily News, said the combination will allow the papers to save on wire service fees and to take advantage of combined advertising revenue.

The two papers will be combined for circulation auditing purposes. The Inquirer has a circulation of 330,000 compared to the 100,000 of the Daily News.

The consolidation in Philadelphia followed Friday's closure of the Rocky Mountain News by EW Scripps.

In Boston, The Boston Herald said it was looking to make around 20 job cuts. It delivered letters to 400 commercial and editorial staff asking for voluntary redundancies.

Herald Publisher Patrick Purcell said January ad revenue in Boston was down in the "high teens".

Maryland's Frederick News-Post also announced it is to cut its Monday editions. The last one will be printed on March 30.

Rodale, publisher of Men's Health, cut 20 jobs from its sales operation, including senior positions at its Prevention magazine. This follows 111 jobs -- or 10% of its workforce -- cut in November.

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