Fitch Lowers Dow Jones' Debt to 'A' After MarketWatch Acquisition.

CHICAGO -- Fitch Ratings has lowered Dow Jones & Company, Inc.'s (Dow Jones) senior unsecured debt rating to 'A' from 'A+' and affirmed the 'F1' commercial paper rating in accordance with the guidance from Fitch's press release and rating rationale from Dec. 21, 2004. This action follows the completion of Dow Jones' acquisition of MarketWatch, Inc., which was announced Jan. 24, 2005. Fitch has also removed Dow Jones from Rating Watch Negative. The Rating Outlook is Stable. This action finalizes Fitch's review of the rating following the Nov. 15, 2004 announcement that Dow Jones had signed a definitive agreement to acquire MarketWatch in a cash offer for $519 million.

The rating action reflects the weaker credit profile for Dow Jones that will result from the higher debt levels associated with the transaction, while recognizing that the acquisition will improve the company's competitive position online. Leverage, as measured by debt/EBITDA, is expected to increase from the 0.7 times (x) for the trailing 12-month period ended Sept. 30, 2004 to approximately 2.0x and adjusted debt (including the capitalization of lease obligations)/EBITDAR to increase from 2.0x to approximately 3.0x. While Fitch considers these credit metrics initially to be weak at the 'A' rating level, management's focus on strengthening the company's credit profile in the wake of the transaction is a key factor in Fitch's rating assessment. Fitch anticipates that the company will forego share repurchases and sizable acquisitions and apply free cash flow to reduce debt, with the long-term objective of restoring credit metrics consistent with the previous rating.

The acquisition is being financed from a combination of proceeds from a paydown of excess cash balances, proceeds from the exercise of stock options and from new debt financing. The new debt is expected to approximate $400 million, consisting of a combination of commercial paper and new term debt. The acquisition of MarketWatch represents an important strategic step in strengthening Dow Jones' position as a leading provider of business news and information in print and online. With pro forma revenue of $81 million and EBITDA of $3 million in 2003, MarketWatch is a major provider of business news and information online. The addition of MarketWatch significantly expands Dow Jones' addressable online audience base from approximately three million unique visitors per month (through the company's Wall Street Journal online) to a combined nine million unique visitors per month.

Dow Jones' business operations typically generate cash flow well in excess of the company's funding requirements for capital expenditures and shareholder dividends, which supports the company's objective of paying down acquisition-related debt. Also contributing to Fitch's rating evaluation are the unique quality of the company's primary business franchises and its strong newspaper market position, which strengths are partially offset by the company's heavy reliance on revenues from advertising. In particular, Fitch is concerned about the persistent weakness in the technology and financial advertising categories in The Wall Street Journal. These categories, which have represented up to 40% of advertising revenues, have fallen significantly since their peak in 2000 and have not substantially recovered despite the steady progress of the domestic economy over the past two years. While Fitch does not believe that any further weakening in these categories is likely, the timing of any recovery is uncertain and will affect the rate at which the company is able to reestablish a stronger overall credit profile.

Also factored into the rating are some concerns about liabilities arising from a contract dispute with a provider of data services to Telerate, a former Dow Jones' subsidiary. When Dow Jones owned Telerate, Dow Jones entered into a guarantee covering payment on a contract with Cantor Fitzgerald to provide data services to Telerate. After Telerate was sold and Telerate's new parent company, Bridge Information Systems, declared bankruptcy in 2001, Cantor and MDC sought payments from Dow Jones under the guarantee. The company is in litigation with Cantor Fitzgerald and other parties over this guarantee and has asserted a variety of legal defenses. However, the company has taken a $250 million charge, representing the present value of the payments due under the contract. The lawsuits arising from this dispute are in the discovery stage, with trial scheduled for July 2005. While the outcome of the litigation is highly uncertain, full performance on the contract could affect Dow Jones' credit profile.