Feb. 27 (Bloomberg) -- The Denver Post, the city’s only major newspaper after the Rocky Mountain News shuts down, can turn a profit this year, said William Dean Singleton, its owner.

Today’s edition of the Rocky will be its last, E.W. Scripps Co., its publisher, said yesterday. Scripps is pulling out of Denver after failing to find a buyer for the unprofitable Rocky and turning over its stake in an eight-year-old joint operating agreement to Singleton’s MediaNews Group Inc.

“This dramatically improves the finances of the Denver Post” because joint publishing was weighing on costs, Singleton, chief executive of MediaNews, said in an interview. “We can return to profitability this year.”

The Denver Post will face the same deepening decline in advertising sales and circulation that shuttered Rocky Mountain News, said Ken Doctor, an analyst with Outsell Inc. in Burlingame, California. Publishers including New York Times Co. have said ad revenue are poised to fall further this year.

“Even as the Post picks up readers, adding to its rate base, it will have a hard time pricing up advertising in a time of ad cutbacks,” Doctor said. “They suddenly find themselves confronting the same market conditions with no partner to share lots of the costs.”

Combined average circulation for the two newspapers fell 6.6 percent to 420,867 during the six months ended Sept. 30 compared with the same period a year earlier, according to the Audit Bureau of Circulations.

‘Risk of Default’

In December, Moody’s Investors Service reduced its rating on $962 million in MediaNews’s debt by three levels to Caa3, the third-lowest grade, citing rising concern the publisher may violate loan covenants.

Moody’s said at the time in December MediaNews faced a “heightened risk of near-term default” under a recently amended secured credit agreement, as well as potential difficulty refinancing a revolving credit line in December.

“Having a competitor exit one of its markets might provide some short-term relief in Denver, but they’re not out of the woods yet,” said Mike Simonton, a credit analyst for Fitch Ratings. “MediaNews has their work cut out for them in Denver and their other markets in order to generate enough cash flow to remain in compliance with their covenants.”

MediaNews has about $450 million in bonds, according to Bloomberg data. The Denver-based publisher’s 6.375 percent note due April 2014 was valued Feb. 20 at 4.25 cents on the dollar, yielding 153.74 percent, according to Trace, the bond-price service of the Financial Industry Regulatory Authority.

‘Another Era’

“There’s no question the debt we carry today was designed for another era,” Singleton said. MediaNews is up to date on its debt servicing payments, he said.

The Denver Post, which Singleton owns through MediaNews, will win most of the Rocky’s subscribers beginning Feb. 28, said Jim Nolan, a spokesman for the Denver Newspaper Agency, which manages the joint operating agreement.

Employees that arranged advertising and other operations for both newspapers will remain, working exclusively for the Denver Post, Nolan said. The Rocky’s 235-member staff will remain on the payroll until April 28.

“The challenges in terms of advertising are the same as in any city,” Singleton said.

The Denver Post this month eliminated six editing positions, including that of Gary Clark, managing editor of news, in part to make room in the budget to hire from the Rocky, Singleton said.

Hiring From the Rocky

Greg Moore, the Post’s editor, told employees in a memo yesterday that he had hired about 10 reporters and editors from the Rocky Mountain News. “I know there’s no more room in the budget” to hire anyone else, Moore said in an interview.

Industrywide print ad sales suffered their worst plunge in at least 37 years in the third quarter, according to the Newspaper Association of America.

Hearst Corp. is seeking to sell its Seattle Post- Intelligencer and may close it if no buyer is found. The company said this week it may sell or shut the San Francisco Chronicle if it can’t cut enough jobs. Gannett Co.’s Tucson Citizen newspaper in Arizona is also on the block and the publisher said it will close if a buyer isn’t found by March 21.

“The revenue picture is more challenging than it’s ever been,” Mark Contreras, Scripps senior vice president of newspapers, said in an interview. “Every market is challenged.”

He said the Rocky lost $16 million last year and cost about $2 million a month to run.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: February 27, 2009 01:06 EST