Black Press appears poised to sell Victoria building
Postmedia isn't the only publishing company that's putting its real estate up for sale.
The Victoria Times Colonist has reported that Black Press is about to close a deal to sell its 30,000 square-foot building in the 800 block of Broughton Street. (That's one block up the street from the Victoria Public Library central branch).
According to an article by Andrew Duffy, Black Press listed the building and adjacent parking lot for $7.65 million.
The buyer, developer Dave Chard, has not revealed the price, noting that the deal won't close until the end of November.
Black Press will reportedly remain on the premises as a tenant over the short term as Chard seeks rezoning for a condominium development.
Black Press publishes community papers across the Lower Mainland, including the North Shore Outlook, various editions of the Leader, West Ender, and Richmond Review. It also owns papers in other parts of B.C., Alberta, and the United States.
In the summer of 2012, Black Press chairman David Black generated a great deal of media attention when he expressed interest in building a refinery near Kitimat. This would be to refine oil that could be transported through the proposed Northern Gateway pipeline.
This came two months after Standard & Poor's had dropped its outlook on Black Press from B/stable to B/negative because of "ongoing headwinds the company faces with revenue and profitability declines".
This was in part because of "refinancing risk with its senior secured bank facilities", which matured in August 2013.
Moody's Investors Service also downgraded Black Press's rating around the same time.
Then in November 2012, Standard & Poor's cut Black Press's credit rating to B- "based on our view of the company's ongoing organic revenue and profit declines, as well as refinancing risk".
However, the two ratings agencies improved their outlook this summer.
In July, Standard & Poor's maintained the B- rating, but revised its outlook upward from "negative" to "stable".
The same month, Moody's Investors Service revised Black Press's rating from "under review" to "stable".
Here's the rationale, as stated on the Moody's website:
Black Press' B3 CFR reflects high business risk resulting from secular industry pressures and vulnerability to cyclical advertising spending, and the company's acquisitive growth orientation, which could cause its leverage to increase (adjusted Debt/EBITDA was 4.8x at fiscal yearend 2013). While the American newspaper operations have shown some improvement, the Canadian newspapers and commercial printing operations, which make up more than 70% and 80% of total revenue and EBITDA respectively, have recorded weaker results than anticipated, driven by negative secular trends in the newspaper publishing industry and soft economic conditions. These trends are expected to continue as print advertising shifts to digital platforms. The rating benefits from the company's good market position in western Canada, positive free cash flow generation and continued focus on debt reduction. The rating also reflects the company's discipline around cost reduction which has helped to maintain adjusted EBITDA margins around 20%. Also, assets outside the restricted group that generate about $20 million of annual EBITDA add a measure of diversity to Black Press' asset base.
The outlook is stable because Moody's expects Black Press to continue to generate positive free cash flow to repay debt despite the challenges facing the newspaper publishing industry.
An upgrade in Black Press' rating could be considered if the company reverses the decline in revenue and sustains adjusted Debt/ EBITDA towards 4x and EBITDA - Capex/ Interest above 2x. Black Press' ratings would be downgraded if free cash flow generation remains negative for an extended period or if deterioration in revenue and earnings should cause adjusted Debt/EBITDA to be sustained above 6x. A material debt-financed acquisition could also lead to a downgrade.
The principal methodology used in this rating was the Global Publishing Industry Methodology published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Toronto-based Torstar Corp., which publishes the Toronto Star, owns almost 20 percent of Black Press.