Moody’s Investors Service says that revenue for Hanley Wood has fallen "below the level at which the company can cover its fixed costs and it continues to consume cash" and the publisher is very likely to face a restructuring "since the current business cannot support the existing debt load which was set near the peak of the housing bubble."
However, Hanley Wood CEO Frank Anton tells FOLIO:, "We strongly believe the company has sufficient liquidity to fund day-to-day operations into the foreseeable future–in short, we disagree with Moody’s assessment–and you might recall Moody’s is the same company that saw fit to rate securitized mortgage debt AAA."
Hanley Wood could violate its loan covenant as of Jan. 1, according to Moody’s, which lowered the publisher’s corporate rating four points to "Ca." In May, Standard & Poor’s dropped its rating for Hanley Wood from "CCC" to "CCC-," citing concerns over the b-to-b publisher’s performance and ability to meet covenants in the near future. S&P said it was concerned that Hanley Wood will be "unable to meet financial covenant step-downs in early 2012 without an amendment, a refinancing or repayment of the revolving credit facility, or an equity cure from sponsors."
While he wouldn’t comment on the covenant issue, Anton told FOLIO: last week that revenue was up in the high single digits while earnings grew 20 percent in the first half of 2011. He also said that while the print and data businesses remain challenged, events have bounced back (with all shows outperforming 2010) and the custom marketing business is on track to have its best year ever.
The second half of 2011 will be "more or less a carbon copy of the first half, save perhaps for print advertising which could be somewhat weaker in QIII and QIV," Anton said.