Cygnus’ Credit Rating Outlook Revised to ‘Negative’
S&P cut comes as publisher explores potential sale.
Financial credit rating agency Standard & Poor’s has revised Cygnus Business Media’s credit rating outlook from stable to negative because of concerns over Cygnus’ significant debt due in 2009.
According to S&P, the new rating—a "CCC+"—reflects several financial factors, including Cygnus’ limited liquidity, high debt leverage, small EBITDA base and what it calls “difficult business fundamentals.” In a release, S&P called Cygnus’ margin of compliance with covenants “very thin,” and said they will be a significant hurdle for the company moving forward.
For the first quarter, Cygnus’ revenues were down 1.5 percent while EBITDA was flat, S&P said, although it didn’t offer specific figures. After adjusting for closed publications and timing shifts, revenue was up 3.4 percent and EBITDA was up 5 percent.
A S&P analyst was not immediately available for comment.
A key challenge for Cygnus, according to S&P, will be refinancing its $157 million in debt that’s due next year, including its senior secured term loan that matures July 13, 2009.
"The main reason for the outlook change is that the majority of the company's debt is maturing next year," a Cygnus spokesperson wrote in an e-mail to FOLIO:. "Adjusting the outlook is commonly done by the rating agencies until they get a clear view of what a company will do with the maturing debt. Obviously, we are aware of it. At the appropriate time the company will evaluate its options and we are confident in a successful outcome."
The revised credit rating comes as the ABRY-owned b-to-b publisher is exploring a possible sale. Cygnus co-CEOs Carr Davis and Tony O’Brien said in an interview with FOLIO: last week that Cygnus has been approached with inquiries, and carefully described the potential divestment as “a process.”
During the interview, Davis said Cygnus increased e-media revenue by 60 percent from 2006 to 2007, and from 4.5 percent of total revenue in 2006 to 10 percent of total revenue in 2007.
Cygnus went on the block in 2006 but subsequently pulled off the market that year.
Earlier this year, S&P revised its outlook of Hanley Wood from stable to negative, citing the soft housing market and “weaker than expected” 2007 operating results.
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I am shocked, really I am
Submitted by Anonymous on Tue, 06/17/2008 - 12:29.Who didn't see this coming?
Owes $157 million
Submitted by Anonymous on Tue, 06/17/2008 - 13:57.Bought it for $275 million, Macker reportedly put in $100 million and they owe $157 million... so what have they done with all the profit over the last 7 years? I gusss the Arby people got a nice chunk.
Wishing the Year was 2006
Submitted by Anonymous 2 on Tue, 06/17/2008 - 14:17.Obviously, they're really wishing they could retake the offers that were on the table in 2006. When this "once-great" company goes completely flat and belly up in a year, some other company will come in buy them in a heartbeat for much less than what any company would even pay now, which I suspect is still 30% less than what was offered for payment in 2006.
I am not shocked at all
Submitted by Anonymous on Tue, 06/17/2008 - 14:37.I am not shocked at all. I worked for them 2005 through the end of 2006. You could see this coming,....
Is it any wonder?
Submitted by Vendor on Tue, 06/17/2008 - 14:55.Put a serious real world business in the hands of a bunch of arrogant young Web nimrods? It seemed like a good idea at the time! If Cygnus had taken the cash it spent on its pitiful do-it-yourself Web sites and burned it in a big bonfire for investors to roast marshmallows over, at least it would've generated some value. Now cashy cashy all gone. What are poor poor Web kidz going to do now? Go ruin some consumer magazines perhaps?
re: "Is It Any Wonder"
Submitted by Anonymous on Tue, 06/17/2008 - 15:05.huh, because all the old print nimrods are doing such a great job with their legacy publications? I worked at Advanstar where the management thought the internet was a "fad"...that kind of thinking will do nothing for their $500MM in debt. Get real.
Hanley Wood has a negative rating too - who knew?
Submitted by anonymous on Tue, 06/17/2008 - 15:10.Wonder what Reed's rating is or for that matter trade publishing as a whole. Trade publishing is a business in transition, those publishers who successfully make the transition to being a content provider both in print, but more importantly on-line will succeed and thrive. With interactive revenue up, Cygnus appears to be making that transition. I'm hopeful that trade publishing as an industry also makes the transition. We provide vital information to millions of small business people -- what will fill the void -- UTUBE for Business?
Off the cliff
Submitted by Anonymous on Tue, 06/17/2008 - 15:17.I was a Cygnus employee and to anyone with even a modicum of common sense this is no surprise.
Everyone got fat except their employees who took forced pay cuts and routinely clock 60+ hour work weeks in a futile attempt to put out quality products while management is figuring out the latest and greatest way to screw them.
In one of the more absurd things I have ever heard, they actually had a low-level salesperson approving all client proposals. No sales person could so much as send a proposal unless this person approved it first, and the person with the approval authority likely had sent no more than a dozen proposals in his/her lifetime.
Carr and Tony have succeeded in positioning themselves as nothing more than hollow snake-oil salesmen who care about nothing other than lining their own pockets.
And oh yeah, they have also succeeded in driving off a cliff what once was a reputable publishing company and demoralizing their entire staff.
Little substance there
Submitted by Anonymous on Tue, 06/17/2008 - 15:34.Most of the Cygnus mags I have seen are nothing more than glorified catalogs, very little editorial substance. The company should have invested in its editorial product.
Off the cliff resp
Submitted by Anonymous on Tue, 06/17/2008 - 16:00."they actually had a low-level salesperson approving all client proposals" You were a Cygnus employee, I AM a Cygnus employee on the sales team and what you're saying is false - plain and simple. There's zero truth in that. In the years I've been there, other than running a proposal by my publisher from time to time, I have never needed anyone else's approval before sending something out. Spewing hearsay as fact is not wise.
re: "Is It Any Wonder"
Submitted by Vendor on Tue, 06/17/2008 - 16:07.Advanstar you say? The same Advanstar that spent over $50 million to achieve intergalactic Web domination in the 1999-2002 time range, putting all its hopes in the hands of (here I go again) a few arrogant young Web nimrods? OK so Advanstar wasn't alone. The nimrods also helped ruin Penton, Reed, the one that was based out of KC, and many others because the in-house Web nimrods made it happen and the business managers let it happen. Show me a B2B publisher who strategically and intelligently outsourced (not counting the CEO's boy/girl-friend who took a 2 day HTML class) and I'll show you a publisher who's still in business and probably making money. A fad? What's the matter? Was $50 million not enough for you?
"hollow snake-oil salesmen"
Submitted by Anonymous on Tue, 06/17/2008 - 16:38.So much for Carr and Tony going in, putting a fresh coat of paint on the place, and getting out with a big bonus.
They don't have the ability to save Cygnus, as they've shown time and time again.
This isn't going to end well no matter what, but it'll be better if ABRY takes out Tony and Carr now. And wouldn't that be justice?
Put someone in that gives a damn about building something real that stands up to scrutiny. Besides, Tony and Carr will probably be happy to leave. This is putting a little ding in their overblown self-images and egos. And the promise of a big payoff isn't looking good.
What, is ABRY still conned by these braggarts? Why don't they care that Cygnus is spiraling downward faster and faster?
"The company should have invested in its editorial product."
Submitted by Anonymous on Tue, 06/17/2008 - 17:20.Ask any editor who worked at Cygnus for any length of time about the company's attitude toward the editorial product, and you will get either a big, fat horse laugh or a deep pool of tears. When Cygnus was merely indifferent to what went into the magazines, it was possible for conscientious editors to deliver quality content under the radar. Then most of the publishers began making war on any editorial matter that wasn't reciprocal to advertising in the same issue, usually in the most blatant and integrity-sacrificing way. Management encouraged this open hostility toward editorial quality and, far from making any meaningful investment in the editorial product, took deliberate steps to eliminate it under the pretext of cost-cutting. It's a shameful story that now appears to be coming to an appropriately ignominious end.
B2B
Submitted by Anonymous on Tue, 06/17/2008 - 23:04.The Crains of the world are doing just fine-they did just that-outsourced web development until they saw what worked (and didnt) and continued to invest in high-quality editorial products.
The dot-com geniuses got their hands into the Pentons, Cygnus (with few exceptions Cygnus books were not market-leaders either), Advanstars, Primedia/Intertecs, etc-and have driven these business straight into the caca...
Also keep in mind that in many of the markets served the advertising base figured out that they could get quantifiable ROI, especially in the tech sector, by other means...
Finally-it has become clear in the last few years that these companies exist on the basis of a few large trade shows, and that the publications attached to them are nothing more than direct-mail pieces to support the show...nothing more, nothing less.
The End Is Near
Submitted by Anonymous on Wed, 06/18/2008 - 14:38.The next chapter in the Cygnus tragedy will be Chapter 11.
This is the end
Submitted by Anonymous on Thu, 06/19/2008 - 08:21.Wondered what happened to the guy on the street with the sign that said "The End Is Near".
Chapter 11 is not the end --- no matter how much you want it to be ----
Buyer Beware
Submitted by Anonymous on Thu, 06/19/2008 - 14:09."Davis said Cygnus increased e-media revenue by 60 percent from 2006 to 2007, and from 4.5 percent of total revenue in 2006 to 10 percent of total revenue in 2007." Wow, what a sham. Hope potential buyers look closely at those internal numbers. Some say that Cygnus routinely moves ad revenues from print into web revenues in order to boost the print/web ratio. If that's true, it's fraud, plain and simple, and potential buyers ought to be aware.
Start Writing Some REAL Stories, People!
Submitted by Anonymous on Thu, 06/19/2008 - 15:53.Okay, I don't even know why I'm responding to all this malarchy. To Folio, congratulations, hope you got the reaction you wanted from pushing the panic button. FYI- Writing about companies in debt is not news. We are in a recession, so what do you expect? Wake up and smell the coffee; almost every corporation in America is going through these situations. With that said, this piece is just another example of bad journalism. You guys operate the same way as tabloids to celebrities.
Bad Journalism?
Submitted by Anonymous on Fri, 06/20/2008 - 13:25.I hardly think the management of Cygnus is fit to judge what constitutes good journalism. The lowering of a company's credit rating to CCC+ is legitimate business news, especially when the CEOs announce they are considering a sale. Not "every corporation in America" has a C-level credit rating. There is a difference between journalism and public relations.
As far as Chapter 11 not being the end--it will be the end for those people who lose their jobs.
Chapter 11 does not close the company
Submitted by Anonymous on Sat, 06/21/2008 - 16:45.Chapter 11
Reorganization Under the Bankruptcy Code
The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)
Re: Buyer Beware
Submitted by Anonymous on Sun, 06/22/2008 - 09:43.Regarding: "Some say that Cygnus routinely moves ad revenues from print into web revenues in order to boost the print/web ratio. If that's true, it's fraud, plain and simple, and potential buyers ought to be aware."
What is going on with Carr and Tony owning this new ad network? Carr and Tony are personally profiting from Cygnus ad revenue? How can that be kosher?
[And regarding: "I hardly think the management of Cygnus is fit to judge what constitutes good journalism." OK, that was funny.]
Not All That Funny
Submitted by Anonymous on Sun, 06/22/2008 - 13:52.Contrary to what Rich Reiff was alleged to have said, salesmen do not make the best writers. The point is, the management consists mostly of marketing-type people. There was a reason why they got rid of so many publishers who had editorial backgrounds. What they care about most is money, not editorial integrity.
Re: Re: Buyer Beware
Submitted by Anonymous on Mon, 06/23/2008 - 09:43.My point is, If Carr and Tony are cooking the books TO MAKE IT LOOK LIKE they are increasing web-based sales in order to convince a buyer that CYGNUS IS A GREAT WEB-BASED REVENUE GENERATING COMPANY, then potential buyers ought to be made aware that those WEB-BASED NUMBERS ARE FICTION. Not only are print-based revenues declining, but web-based numbers are cooked in order to look better than they really are.
From the "little guys"
Submitted by Anonymous on Thu, 09/11/2008 - 16:45.What on earth does this mean for "the little guys"...in other words... will we get another layoff.. cut in hours & pay again.. or worse yet...will everyone lose their jobs because Cygnus ends up having to close their doors? What's in store for us all? We'd like an accurate UPDATE, please.
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