Sacramento Business Journal

Shares of The McClatchy Co. dropped for the sixth-consecutive trading day, falling about 3 percent before recovering slightly Wednesday after a Bear Stearns analyst started coverage of the newspaper chain with an "underperform" rating.

Also Wednesday, Standard & Poor's Rating Service lowered the Sacramento-based company's credit rating from "BB-plus" to "BB," dropping McClatchy deeper into junk-bond territory. The rating company cites McClatchy's declining advertising revenue as the primary reason for the downgrade.

McClatchy (NYSE: MNI) -- publisher of The Sacramento Bee, The Miami Herald and 29 other daily newspapers -- reported Tuesday that October advertising revenue dropped 9.9 percent from a year ago, largely because of the hard-hit housing market, especially in California and Florida. Analyst Alexia Quadrani said the housing downtown will continue to hurt the nation's third-largest newspaper chain.

McClatchy, like many national newspaper chains, has been battling declining advertising revenue and the loss of readers in recent months, and reported a money-losing third quarter last month. The company announced a $1.5 billion write-down in the third quarter to better reflect its lower-valued assets, including the purchase of the former Knight Ridder Inc.-owned newspapers and its lower stock price.

McClatchy reported a third-quarter loss of $1.35 billion, or $16.40 per share, for the third quarter, including the write-down, which the company warned of as part of its preliminary report in October. Excluding the charge, McClatchy earned $23.5 million, or 29 cents per share, compared with income of $51.8 million, or 64 cents per share, for the three-month period last year.

Shares of McClatchy dropped 21 cents to $14.53, but had reached a new 52-week low of $13.77 in midday trading Wednesday.