Johnston Press downgraded by Moody's with 'stable' outlook

Moody's has downgraded the ratings of Johnston Press, including its Corporate Family Rating to Caa1 from B3, its Probability of Default Rating to Caa1-PD from B3-PD, and the rating of the £225m senior secured notes issued by its subsidiary, Johnston Press Bond to Caa1 from B3.

The outlook on all ratings is ‘stable’, the ratings agency said in a note to clients on Monday.

"The downgrade reflects the ongoing structural shift in the industry toward digital formats which is causing a persistent erosion of the company's print based revenues,” Moody’s added.

The ratings agency said the UK local and regional media company has made some progress in expanding its digital formats and implemented cost actions to accommodate the ongoing top line pressures, but the downgrade also reflects the accelerating decline in Johnston Press' revenues, which the company has forecast to decline by 7% in 2015, after a 4.4% decline in 2014 according to its latest financials.

Gunjan Dixit, analyst at Moody's, said, “The acquisition of UK national daily newspaper "i" will benefit the company's operations as it brings a growing subscriber base and is free cash flow generative.

“However, the acquisition will absorb £22m of cash resources in 2016 and £2m in 2017. While Johnston Press has committed to sell certain non-core print assets to help restore its liquidity, it could be difficult for the company to execute asset sales at attractive prices in the tough operating environment.”