It was an uplifting day yesterday for Canadian newspaper companies, which unlike other media, such as broadcasting, have seen only a modest bounce back off the lows of the recession so far.

Postmedia Network Inc., Canada's largest publisher of paid English-language daily newspapers, saw agency Standard & Poor's raise its debt rating and the publisher of the country's largest daily, the Toronto Star, reported a better-than-expected profit for the fourth quarter led by a rise in advertising spending.

"The results were ahead of our expectations and outlook, from our perspective, is pretty positive," Drew McReynolds, analyst at RBC Capital Markets said of Torstar, which also produces dozens of community newspapers and operates Harlequin, a publishing powerhouse of romance novels.

Torstar booked an unexpected rise in both revenues and operating earnings, topping Bay St. estimates in the process. Chief executive David Holland took a cautious tone on the company's outlook during a call with analysts, especially regarding higher economic growth in Ontario. But generally, Torstar anticipates sustained if tempered recovery.

"There's a couple of weak spots in there, specifically retail advertising, but overall the tone of the guidance is sequentially better," McReynolds said.

"Overall we're pleased with some of the revenue momentum they have in the various businesses."

Other than retail, advertising across categories in print and digital lifted revenues at Star Media, the company's daily publishing division, more than six per cent. A stable performance from community newspaper unit Metroland contributed to a rise in overall revenues to $416 million for the quarter, well above analysts' expectations of $397 million.

Also yesterday, Postmedia Network, the publisher of the National Post and other newspapers, had its grade raised on a portion of its debt, a sign of confidence in the company's financial performance.

Global ratings agency Standard & Poor's lifted its rating on Postmedia's so-called "mezzanine," or least-secure debt, to B from B-- not quite investment grade but above what investors would consider high-risk territory.

The reason for the upgrade is the aggressive schedule Postmedia Network has taken in repaying creditors, who opted last spring to take over the former properties of Canwest Global Communications Corp., now winding up its operations.

Owed roughly $450 million, the unsecured bondholder group paid $1.1 billion to Canwest's senior lenders for the entire chain, which emerged from court protection in July.

The company has since been servicing the amount, divided between first-tier and mezzanine debt, through operating earnings and cash on hand.

"They've paid quite a chunk of (first-tier debt) down so that pushes the second tier to a higher likelihood of recovery," said Lori Harris, analyst at S&P's in Toronto. The agency also reaffirmed its BB grade on the company's senior debt notes and said it anticipates a steady performance from Postmedia Network for the fiscal year.

"We expect the company to continue to pay down debt, generate profits and free cash flow," the analyst said.

Industry watchers and potential investors are waiting for the new media company's second full quarterly results to be released April 8.