Andy Parx over on Kauai called my attention to this little snippet in yesterday’s Star-Bulletin reporting, albeit briefly, on the outcome of our burglary story.
With the cutbacks and layoffs at Gannett’s Honolulu Advertiser, a lingering question has been how things are going down the street at the Star-Bulletin, owned by David Black’s Victoria, B.C.-based Black Press. It seems Black Press has run into the same financial storm as the rest of the industry, according to a series of downgrades of its outstanding debt by rating agency Standard & Poors.
On Jan. 23, 2009, Standard&Poor’s Ratings Services lowered its ratings on Black Press Ltd.’s senior secured bank financing (a C$55 million revolving credit facility, a C$63 million term loan A, a US$25 million term loan A-1, a US$140 million term loan B-1, and a US$85 million term loan B-2). We also revised the recovery ratings. We lowered the ratings on the senior secured bank facilities two notches to ‘B’ from ‘BB-‘ (the same as the corporate credit rating on Black Press). We also revised the recovery rating on the secured debt to ‘3’ from ‘2’, indicating our opinion as to an expected meaningful (50%-70%) recovery in the event of a payment default.
An Editor & Publisher blog cited S&P’s concern about Black’s debt stemming from his 2006 purchase of the Akron Beacon Journal, and quoted another part of the S&P report:
“The downgrade reflects our view of Black Press’ weakened credit protection measures and reduced financial flexibility stemming from lower EBITDA and higher debt levels,” Toronto-based S&P credit analyst Lori Harris said in a note.“Furthermore, we believe the impact of lower profitability and higher debt levels has resulted in the tightening of financial covenants. While management is taking steps to strengthen its operations and liquidity position, we believe that Black Press will remain challenged in fiscal 2010, largely because of difficult industry conditions.”
And how all this will trickle down into the Star-Bulletin newsroom remains to be seen.
Meanwhile, Sean Hao’s story in Sunday’s Advertiser on the companies receiving Act 221 tax credits is definitely worth checking out.
Still University of Hawai’i economics professor Sumner La Croix said the state should suspend the program because the costs far exceed the benefits.
“During these tough times this is the perfect place for the state to be cutting back,” said La Croix, who’s working on a study of the credits for the UH Economic Research Organization. “Yes we would lose a few more jobs, but these are jobs that are incredibly expensive. After looking at the companies that are receiving the (benefits of the) credit, I don’t see the spillover benefits on the rest of the community.”
Unfortunately, many companies now benefiting from the credits may not be sustainable without them, La Croix said.
“This is an industry that’s being built on foundations of sand,” he said.
Maybe newspapers need to declare themselves very high tech and get in on these tax credits before the program disappears.
But it’s hard to see how the tax credit program can survive this legislative session in its current form.