Friday, November 14, 2008

$400mil debt coming due at NYT

An analysis of the New York Times Company's 10Q filing says that they have almost $400 million in short-term debt coming due in May, and might not have the financial resources to cover it.
Specifically, the company must deliver $400 million to lenders in May of 2009, six months from now. The company has only $46 million of cash on hand, and its operations will likely begin consuming this meager balance this quarter or next. The company has been shut out of the commercial paper market, but has a $366 million short-term credit line remaining that it entered into several years ago, when the industry was strong. It has not yet drawn this cash down, and given the current environment and the trends at the company, we would not take for granted that it will be able to do so.
This does not mean that NYT won't be able to pay its bills, but that it must start acting soon to do so. The writer suggests three things the company needs to look at:
  • Sell assets (Boston Globe, Red Sox?)
  • Use the credit line (this assumes the credit line remains available)
  • Cut costs (including cutting the dividend, which the Sulzberger family probably won't like)
The article summarizes the situation as follows: "Will this cash crunch force the New York Times into bankruptcy? No. (Or at least not yet.) The company still has assets, and it is not yet burning so much cash that it can't take steps to save itself. Those steps are likely to be unpleasant, though. And they will be taken at gunpoint."

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