The New York Times provides an update on its business and financial condition:
- November was even worse than October
- $225 million from mortgage or sale of building will go to paying down long-term debt (i.e., won’t be used to fund operations)
- Still in discussions with lenders about $400 million debt facility coming due in 2009 as well as other debt coming due in 2010
- Considering public offerings or private placements (of debt or equity?)
Bottom line: Some progress on liquidity crunch, but no solution yet. The swapping of the building for long-term debt will ease some pressure on the balance sheet, but it will not solve the company’s near-term liquidity problem.
The company says it does not need to replace the entire $400 million credit line that comes due in May, but it certainly needs to persuade its lenders to give it some additional borrowing room. (It already has $400 million of short-term debt outstanding and is burning cash.) Any offering of debt or equity securities–public or private–would likely be very expensive right now. It would also further reduce the company’s equity value, either through share dilution or by moving shareholders even farther underwater in the capital structure.
Mortgaging or selling the building has probably bought some time and some wiggle-room with lenders. The only way to buy real time, however, is to radically restructure the business or sell assets like About.com. The latter will be tough to do in this environment.
“Like others in our industry and, in many businesses across America, we have seen the softness in the economy become more pervasive in the last several months. In November, the rate of change in advertising revenue declined from what we saw in October. The entertainment, real estate and automotive advertising categories were especially soft.
“There is no doubt that 2009 will be among the most challenging years we have faced and more steps will be needed. We believe that through our revenue initiatives, expense cuts and the steps we are taking to improve our financial flexibility, the Times Company is well positioned to weather the challenges next year is expected to bring.”
“We are evaluating our liquidity requirements and are in discussions with our lenders with regard to debt maturing in 2009 and 2010,” said James Follo, senior vice president and CFO. “We have no intention or need of fully replacing the $400 million credit facility expiring next year because our total borrowing under both agreements is projected to be significantly less than $800 million, and currently is approximately $400 million.
“We have begun a process to secure financing for up to $225 million in the form of a sale-leaseback for a portion of our headquarters. The proceeds will be used to repay existing long-term debt. The building provides a unique opportunity for us to borrow at attractive rates in today’s market. We are also looking at various other financing alternatives, including revolvers, public offerings or private placements. While the credit markets remain challenging, we expect to secure the financing necessary to meet our maturities when they come due.