Fairfax chief executive Brian McCarthy said that in the coming financial year the decision would increase the company’s interest expenses by about $10 million.

The ratings agency said that the downgrade reflected the deterioration of Fairfax's advertising earnings.

Standard & Poor’s credit analyst Peter Sikora said, “Although Fairfax's credit metrics have benefited from an equity issue and assets sales, the weaker earnings outlook for the remainder of calendar 2009 has resulted in underlying credit metrics for the company moving outside tolerances for the BBB- rating.”

Mr. McCarthy said as the same time as he was dissatisfied with Standard & Poor’s decision to cut its credit rating to BB+, he was confident Fairfax would weather the current economic conditions.

He further said, “Although we are disappointed with the decision of Standard & Poor’s we are confident that our diversified market positions, strong balance sheet and operational focus will allow us to weather the current economic conditions and to take advantage of any upturn when it occurs.”

The price of shares dropped as low as 98.5 cents. During late morning trades, the stock decreased by 7% at $1, easily outpacing a sharp decline in the overall stock market.

The benchmark S&P/ASX 200 index was 2.6 % lesser.

(via TopNews New Zealand. Contributed by Girish Kumar Guha)