• by Erik Sass  @eriksass1, March 11, 2009

Moody's Investors Services has introduced a new hall of shame-type feature, "The Bottom Rung," listing companies with a credit rating of B3 or lower, which it considers most likely to default on their debt in the next year. No surprise--the list of 283 beleaguered companies--basically, the bottom 15% of the portfolio of companies tracked by Moody's, updated monthly--includes a good number of newspaper publishers and radio broadcasters. Moody's says 45% of the companies on the list will probably default within the next year.

There were an alarming number of big radio groups on the Moody's list, including Citadel, Cumulus, Emmis, Radio One, and Salem. This is not particularly shocking following a close call with near-bankruptcy by Sirius-XM, the satellite broadcaster, and repeated credit downgrades for other terrestrial broadcasters. In late February, Standard & Poor's downgraded the credit rating of CC Media Holdings, the company formed by private-equity firms to take Clear Channel Communications private, lowering its credit rating from a B to a B-. The decision was motivated by growing concern that the holding company might not be able to keep up with payments on nearly $18 billion in debt assumed in the deal to take the company private last year.

In the collapsing world of newspapers, Moody's identified MediaNews Group as a high-risk candidate for default, along with three smaller newspaper publishers: Freedom Communications, GateHouse Media, and Morris Publishing. Again, these potential deadbeats are in good company: the Tribune Co. filed for Chapter 11 bankruptcy in December, unable to make scheduled payments on an enormous debt of about $11 billion. The Journal Register Co. technically defaulted on its debt of about $700 million last July, and was forced to declare bankruptcy in February when temporary agreements with lenders expired. Last June, Philadelphia Newspapers LLC--the owner of the Philadelphia Daily News and Philadelphia Inquirer--defaulted on its debt of about $390 million, and was also forced to declare bankruptcy in February.

Also in February, the Star Tribune of Minneapolis asked a bankruptcy judge to dissolve its contract with the local printer's union, which ultimately falls under the umbrella of the International Brotherhood of Teamsters. On a (relatively) positive note, Lee Enterprises said it had succeeded in renegotiating the loan covenants governing $306 million in debt, most of which was assumed during its purchase of Pulitzer Inc. in 2005.