DBRS Places Torstar Corporation Under Review with Negative Implications

DBRS has today placed Torstar Corporation’s (Torstar or the Company) Issuer rating of BBB Under Review with Negative Implications. This action follows DBRS’ update of the applicable Industry Methodologies (i.e., Rating the Newspaper and Magazine Publishing Industry and Rating the Printing Industry), which involved lowering the Industry Business Risk Ratings (BRR). For each of the two industries, the BRR was reduced to the BB (high)/BB range from BB (high). (See separate PR released earlier today.)

In each methodology, the rationale for the change was based on DBRS’ view that the highly competitive industries are being increasingly affected by the structural transition toward digital-based mediums. The structural trend is applying pressure to traditional circulation, advertising and printing revenue.

In its review of Torstar, DBRS will focus on the Company’s potential to adapt to the changing environment and will assess the Company’s prospects going forward.

Torstar’s current rating reflects the Company’s sound financial profile and established positions in existing markets. The rating also considers the highly competitive and cyclical nature of the newspaper industry. The earnings profile of Torstar is being challenged as the Company continues to develop a feasible digital revenue model while pressure on its traditional revenue sources continues to mount. Torstar has also struggled to sustain margins and profitability due to lower revenues on a high fixed cost-base, and increased investment spending in digital operations. In terms of financial profile, Torstar is in a sound position as the company remains free cash flow positive and maintains a modest level of debt.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating the Newspaper and Magazine Publishing Industry and Rating the Printing Industry, which can be found on our website under Methodologies.