Another financial time bomb?

While everyone's been fixated on Knight Ridder and its tussle with investors over the company's future or has been wringing his or her hands over revenue projections and staff cuts, Fitch, one of the bond ratings services, dropped another time bomb into the mix.

According to Media Post's Joe Mandese, Fitch Ratings "issued an alarming outlook for the U.S. media industry, raising questions about the ability of big media companies and ad agencies to leverage capital markets to fund deals and other important capital expenditures." (Read the full story.)

Mandese also writes: "Despite a generally favorable economic outlook and predictions of moderate advertising growth, Fitch warned that 'weakened operating fundamentals' will persist for most big media companies, including questionable uses of free cash flow that are likely to make shareholders happy, but would put creditors at greater risk. Among other things, Fitch cited the media industry's trend of 'de-consolidating' to 'unlock" shareholder value, as well as the popular use of special dividends and stock repurchase programs that may make stockholders happier, but raise concerns for bondholders and creditors."

Now, Fitch has been known to be, shall we say, provocative from time to time. But this still is the bottom line: Forget the shareholders and Wall Street. If media companies start having trouble with their credit lines because of negative outlooks, the result will potentially be a lot more serious. Access to the equity markets is what puts the goodies under the Christmas tree, but access to the credit markets is what keeps food on the table. If those rates rise sharply or creditors start getting skittish about lending to the industry, except at what for a multibillion-dollar business would be onerous terms, the economic pain so far will seem like a pinprick.