Extra, Extra: New York Times (NYT) About To Get Downgraded To "Junk"

Standard & Poors has put the New York Times’ (NYT) credit ratings on “Credit Watch with negative implications,” meaning that analysts at S&P are pondering downgrading the company’s corporate credit rating to non-investment, or “junk” status. The move follows another horrible Q2 result in which the company missed both revenue and EPS estimates.

Specifically, S&P cites the “accelerating pace of total revenue decline and a rate of decline in EBITDA in the first half of 2008 that indicates the company may have difficulty achieving our expectations for the current rating.”

See Also: NYT Q1: Slide Continues, Digital Not Helping

Full Release:

NEW YORK (Standard & Poor's) July 23, 2008--Standard & Poor's Ratings Services <br />today placed its ratings for The New York Times Co., including the 'BBB-' <br />corporate credit rating, on CreditWatch with negative implications.<br />     "The CreditWatch listing reflects an accelerating pace of total revenue <br />decline and a rate of decline in EBITDA in the first half of 2008 that <br />indicates the company may have difficulty achieving our expectations for the <br />current rating," explained Standard & Poor's credit analyst Emile Courtney. <br />"This is notwithstanding our understanding that The New York Times is <br />attempting to lower its cost base by more than $130 million in 2008."<br />     Total revenue declined 5% in the March 2008 quarter, 6% in the June 2008 <br />quarter, and 10% in the month of June 2008. In the six months ended June 2008, <br />EBITDA declined by 20% excluding buyout expenditures and by 36% after buyout <br />expenditures. The current 'BBB-' rating incorporates the expectation that <br />total revenue declines would not exceed the mid-single-digit area this year, <br />and that EBITDA declines would not exceed the mid-teens percentage area <br />(excluding buyout expenditures). Maintenance of the current rating also <br />depends on the company growing its online revenue base in a manner that can <br />begin to fully offset print revenue declines over the next two years and, <br />concurrently, EBITDA generation stabilizing over this time frame. The <br />likelihood of the company achieving these goals is complicated by the current <br />pace of print advertising revenue declines, even though online revenue growth <br />at 13% remained good in the June 2008 quarter. In addition, we are concerned <br />the company will be unable to maintain leverage (as measured by total lease- <br />and pension-adjusted debt to EBITDA) at 3.25x or less on average--the target <br />for the current rating. Leverage was 3.5x at June 2008.<br />     In resolving the CreditWatch listing, we will review operating and <br />financial expectations over the near-to-intermediate term.<br /> <br /><br />     Complete ratings information is available to subscribers of <br />RatingsDirect, the real-time Web-based source for Standard & Poor's credit <br />ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings <br />affected by this rating action can be found on Standard & Poor's public Web <br />site at www.standardandpoors.com; select your preferred country or region, <br />then Ratings in the left navigation bar, followed by Credit Ratings Search.<br /><br />


NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.