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The McClatchy Company Message Board

  • imadeadcat imadeadcat Mar 3, 2008 5:28 PM Flag

    I checked MNI debt prices today

    The 7.125% bonds due 2011 were qouted at 84 cents on the dollar. Were I in the CFO shoes, I might be hoping for a credit downgrade before the tax refund comes in and then buying back that debt in q2 at maybe 75 cents on the dollar thereby using "just" $150 million to reduce debt by $200 million... maybe throw the remainder at the revolver/term debt. I hate to say it but a debt downgrade would really help MNI... the sooner the better.

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    • Still at 84 cents on the dollar for the 7.125% due in 2011. Those are the ones I'd be buying if I were MNI. Especially since Uncle Ben looks poised to slash the fed funds rate another .75% in March. MNI's overborrowing to fund the KRI deal is being rewarded by the mortgage mess... possibly saving them another $7.5 million this year. The law of unintended consequences... MNI benefits as the dollar is turned into toilet paper... who'd of thought that.... but now banks are putting floors on loan deals so a company like MNI won't be able to pay 3.5%(their new rate post Ben's next cut on the billion they have floating) anytime soon again. Bought some with an $8 handle today... won't dip in again unless I see $7... maybe next week ex-dividend?

      • 1 Reply to imadeadcat
      • Let me understand this. In the face of plummeting cash flow, you would have the Compnay engage in a massive use of cash to retire three year notes at 84 cents per dollar of face.
        I understand the beneficial effects upon interest coverage and leverage. But ... the cash flow picture (which we thought was bottoming a few months ago) now depicts unendidng deterioration. MNI may soon need the cash you would spend on debt retirement.
        I would suggest cost cutbacks -- albeit carefully accomplished. Unfortunately, the unions may have a say on this subject.
        My small investment was a bet that the cyclical aspects of revenue deterioration would turn around relatively soon. I realized that, due to debt covenants, MNI does not have the financial capability to withstand a lengthy recession. Unfortunately for me, that bet now looks like a loser. Indeed, it looks like we will have (or are having) a major recession. MNI cannot withstand any further deterioration in cash flow without severe consequences for shareholders.
        An 84 cents on the dollar debt buyback may look like a good deal based upon the numbers six to 12 months back. Given the numbers we have today (and deteriorating), maybe 60 or 50 cents on the dollar would be a better price. You might want to keep your powder dry.

        Spette

 
MNI
2.38-0.04(-1.65%)Feb 26 4:02 PMEST

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