The AP and Denver Business Journal report that Standard & Poor’s Ratings Service has lowered the debt rating for MediaNews Group, the Denver-based chain that owns the San Jose Mercury News and 10 other dailies in the Bay Area.

The revised rating, issued Tuesday, “reflect[s] a more significant decline in cash flow than that used in our previous analysis” as well as “challenging operating conditions in the newspaper sector,” S&P said in its credit analysis of MediaNews Group.

Specifically, S&P lowered its issue-level rating for MNG’s secured credit facilities to CCC from CCC+, bringing the rating in line with the chain’s corporate credit rating.

S&P also reduced its “recovery rating” on MediaNews Group’s loans to “4” from “2.” The “4” rating means S&P expects 30 percent to 50 percent recovery for lenders in the event of a payment default. S&P’s recovery rating is on a scale of 1 to 6, with 1 meaning full recovery of loans after a payment default is expected.

In a separate report, S&P said that it believes “that if MediaNews were to default, there would continue to be a viable business model driven by the importance of its newspaper businesses to a smaller, core customer base.”

MediaNews Group has repeatedly said that it is not in danger of default and that recent credit ratings are overly harsh on the company.

Bay Area Media News

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