Red Ink and the NY Times – you must excuse the pun. The NY Times runs a story on itself. No they really did make themselves news in the Media and Advertising section. Their story “Resilient Strategy for Times Despite Toll of Recession” covers a lot of ground. You can read the entire story here.
The question they don’t fully address is can the Times make its debt payments next year with that new 14.2% loan and reduced credit lines? The story mentions that “most analysts think it will have a positive cash flow in 2009.” – but it doesn’t name one analyst nor does anyone from the Times go on record stating that they can make the payments.
But the company reported last month that its newspaper ad revenue fell 14.2 percent in 2008, for a drop of 19.5 percent in the last two years; industry wide, the declines were about 16 percent and 23 percent.
The drop-off in ad revenue both online and in print has put a squeeze on the company’s cash flow. As a result, the Times Company has been looking to raise money by trying to sell its stake in the Boston Red Sox and arranging a sale-leaseback of its new headquarters building.
It slashed its stock dividend by almost three-quarters, and last month, it agreed to borrow $250 million on punishing terms, including an interest rate above 14 percent, from Carlos Slim Helú, a billionaire from Mexico.
“For most newspapers, we view a flattening-out” of revenue in 2010 or 2011, said Mike Simonton, senior director at Fitch Ratings, “but it’s very murky.”
One of the company’s two revolving credit accounts will expire in May, with no realistic prospect of renewal, reducing its capacity for short-term borrowing to $400 million. The company already owes $380 million on the two accounts, leaving little room to maneuver. It also has a $99 million payment on longer-term debt due in November, and $250 million in March 2010.
I also find it interesting that they went to a private investor for the entire $250 million note. The CLO market has hundreds of billions of dollars to invest in loans for companies like the NY Times. Was the Times advised by someone on Wall Street that there is little desire in the CLO market to take on their risk? Or was the 14.2″% deal the best rate offered?
I wonder if they will make their own headlines if they default? I doubt it will make front page news.