Ratings agency S&P has upgraded Fairfax Media. Photo: Michel O'Sulllivan
Ratings agency Standard & Poor's has upgraded the credit rating outlook for Fairfax Media, saying the publisher had "adopted a credible strategy to stabilise group earnings over the medium term".
S&P had revised the outlook on its 'BB+' long-term rating on Fairfax to stable from negative.
This means Fairfax - publisher of BusinessDay and The Australian Financial Review - is considered less likely to default, although its debt retains a junk rating.
After loading up on debt before the financial crisis, Fairfax now has little debt after asset sales, including most recently part of its stake in online dating site RSVP. It has also cut costs aggressively.
Analyst concerns have centred, instead, on Fairfax's revenue outlook. A note today from Credit Suisse said Fairfax's decision to engage rival APN to print several of its newspapers in Auckland could generate between $10 and $20 million in combined cost savings, of which Fairfax would get $6 to $12 million.
Standard & Poor's credit analyst Graeme Ferguson said the outlook revision "reflects our view that management has properly identified the structural challenges facing the media industry and adopted a credible strategy to stabilise group earnings over the medium term."
S&P affirmed its 'BB+' rating on Fairfax, and raised the recovery rating to '3' from '4' on the company's outstanding senior unsecured notes. It also assigned 'BB+' ratings and recovery ratings of '3' on the company’s syndicated bank facilities.
Shares in Fairfax lifted 2¢ on the news, to 92.75, taking its year-to-date rise to 44.5 per cent.
S&P does not rate Network 10 or Seven West Media, nor radio companies such as Southern Cross Austereo.