Rating dulls Golden Books

Sources say Perlman close to exit

Willa Perlman is believed to be joining the long roster of top-level executives exiting Golden Books Family Entertainment. Sources said Thursday she was close to resigning.

Perlman’s departure would be a big blow to the beleaguered publisher, as only two years ago she was recruited by CEO Dick Snyder to head up its children’s publishing group.

Although Golden Books spokeswoman Kathleen Makrakis said Thursday, “Willa is still with the company,” publishing circles were abuzz with talk of Perlman’s exit.

Perlman, who signed a three-year contract in May 1996 when she followed Snyder over from Simon & Schuster, could not be reached for comment.

Talk of Perlman’s exit comes on the heels of Golden Books’ saying it was “disappointed” by the recent lowering of its credit rating. The company also confirmed that it had pledged unspecified assets to secure the $30 million credit line announced earlier this week.

Makrakis nonetheless cautioned against expectations of “a big improvement” in the second quarter.

However, after explaining that the first and second quarters are not only soft for children publishing in general but freighted with promotional outlays, Makrakis said: “We are looking forward to later in the year when people can see the progress we’ve made.”

Rating downgraded

New York-based Golden Books signed its credit agreement with NationsCredit Commercial Funding just days after Standard & Poor’s lowered its credit rating for the children’s book publisher to triple-C-plus and downgraded its ratings outlook to negative.

A CCC rating is defined as “extremely weak,” meaning the meeting of security obligations may be dependent on favorable business conditions. Golden Books’ rating had been single-B, where a B means “weak financial security characteristics.”

Standard & Poor’s incorporated Golden Books’ obtaining credit into its analysis before the rating cut, saying the revolving line would provide only “near-term flexibility, as the company will need to meaningfully restore profitability and generate positive free cash flow in order to meet debt service requirements over the intermediate term.”

Last month, Golden Books reported a first-quarter loss of $21 million, compared with a loss of $8.9 million in the year-earlier quarter, as sales declined 29% to $46.5 million.

On slashing the publisher’s rating, Standard & Poor’s cited Golden Books’ operating cash flow loss, which widened to $6.4 million from $1.3 million in the year-earlier quarter.

The downward trend in financials prompted the rating service to express “concerns regarding the extent to which management’s restructuring actions will enable the company to achieve meaningful long-term profitability in light of the highly competitive nature of the children’s publishing industry.”

But even Standard & Poor’s was willing to admit that, the competition notwithstanding, Golden Books’ trademark remains among the most recognizable in children’s mass-market books. Classics include “The Poky Little Puppy,” “Little Lulu,” “Pat the Bunny” and “The Saggy Baggy Elephant.”

Snyder, the ousted Simon & Schuster chief who’s in charge of turning Golden Books around, has been granted a long honeymoon since taking over in May 1996. But he has yet to produce a profit, despite major churning among top-level personnel.

Makrakis has been with the publisher only a month, for example, while John C. Ferrara joined as CFO in mid-April.

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