Carlos Slim has loaned the New York Times (NYT) $250 million. This further lessens the immediate cash crisis and should give the company another year or so of breathing room. As we expected, however, the money was breathtakingly expensive.
Two of Slim’s companies now own $250 million of NYT Senior Unsecured Notes paying annual interest of 14% ($35 million a year). In addition, Slim gets warrants on 16 million shares of Class A common stock, which equates to just over 10% of the company. (Class A shares are for the hoi polloi. The Class B shareholders, including the Sulzbergers, still control the company).
We estimate that the New York Times Company will need about $200 million of cash this year and about $500 million in each of the next two years. Slim’s money, combined with some of the company’s other recent cash-raising initiatives, should get it deep into 2010.
This money will not, however, solve the company’s long-term viability problem. It will also not allow the company to turn cash-flow positive anytime soon: On the contrary, the additional interest load combined with the ongoing deterioration of the business will increase the amount of cash the company burns each year.
But breathing room is good, especially in this economy.
The New York Times Company Enters into Agreement with Banco Inbursa and Inmobiliaria Carso for $250 Million in Senior Unsecured Notes
NEW YORK–(BUSINESS WIRE)–Jan. 19, 2009–The New York Times Company today announced that it had entered into a private financing agreement with Banco Inbursa, S. A., Institucion de Banca Multiple, Grupo Financiero Inbursa (“Banco Inbursa”) and Inmobiliaria Carso for an aggregate amount of $250 million ($125 million each) in senior unsecured notes due 2015 with detachable warrants. The notes will rank equally and ratably on a senior unsecured basis with all senior unsecured obligations of The New York Times Company.
“This agreement provides us with increased financial flexibility to continue to execute on our long-term strategy,” said Janet L. Robinson, president and CEO. “The proceeds from this transaction will be used to refinance existing debt, including amounts currently borrowed under a revolving credit facility that matures in May 2009. We continue to explore other financing initiatives and are focused on reducing our total debt through the cash we generate from our businesses and the decisive steps we have taken to reduce costs, lower capital spending, decrease our dividend and rebalance our portfolio of assets.”
“We are very pleased to expand our strong relationship with The New York Times Company,” said Arturo Elias, director of Inmobiliaria Carso. “We believe that with the strength of The New York Times brand, its national and international reach, its potential for digital expansion and most of all, its world-class news and information, the Company will continue to be a leader in the media industry.”
The notes have a coupon of 14.053 per cent, of which the Company may elect to pay 3 per cent in kind. The notes are callable beginning three years from the issue date at 105 per cent of par, with subsequent call prices declining ratably to par.
Banco Inbursa and Inmobiliaria Carso also received detachable warrants for an aggregate amount of 15.9 million Class A shares (50 per cent each), at a strike price of $6.3572. The warrants expire in January 2015.
Mr. Carlos Slim Helu and members of his family are the main shareholders of Grupo Financiero Inbursa, S.A B. de C.V., which is the parent company of Banco Inbursa, and are the owners of Inmobiliaria Carso, which currently holds 6.9 per cent of the Times Company’s Class A shares.
SunTrust Robinson Humphrey, Inc. was the sole placement agent for this transaction, and Goldman Sachs advised the Company.
Information relating to these securities will be filed on a Current Report on Form 8-K with the Securities & Exchange Commission.