Posted on 11/10/2008 4:38:04 AM PST by abb
The New York Times Company's 10Q (NYT) contains more details on the company's cash crunch.
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.
The New York Times is in discussions with its lenders about the May payment, and management thinks it will be able to work something out ("We expect that we will be able to manage our debt and credit obligations as they mature." Note the use of the word "manage" as opposed to "meet.") The company does not provide details as to what this managed solution might look like, so here are some possibilities.
1. Sell assets. This is a must. It is also likely to be difficult and painful in the current environment. As we noted in "New York Times Running On Fumes", the New York Times has gotten itself in a situation where it will be forced to choose among multiple bad options just to pay its bills. A fire sale of the building, the Boston Globe, the Red Sox, and/or other assets is one of them.
2. Draw down the $366 million remaining on the second credit line immediately. This option, too, unfortunately, is problematic (if it weren't, the NYT would almost certainly have already drawn this money down). What is a "credit line"? It is a promise, on paper, that a bank will lend NYTCO money when it wants it. This promise was made several years ago, when the New York Times and the rest of the newspaper industry were undefeated heavyweight fighters in perfect physical shape. Now, it's the 11th round, and they're battered and bloody and slumped on the ropes.
Doesn't the bank that signed that credit line have to give NYTCO the money? Not necessarily. The bank is contractually obligated to give NYTCO the money, but some contracts, obviously, are barely worth the paper they're printed on. Given the current circumstances, if we were that bank, and we were as strapped and scared as most banks are these days, we would certainly be reading the fine print to see what sort of "material adverse change" clauses the contract might include. Even if NYTCO could persuade us that early 2009 is not going to be as bad as it seems like it will be, the money will be due in two years, in 2011, and 2011 just isn't that far away.
3. Make major cash-saving cost cuts, including eliminating (or severely cutting) the dividend. This won't conjure up $400 million by May, but it might convince a lender that NYTCO understands what it is up against and is committed to taking the tough steps necessary to deal with it. It would also allow the company to keep generating cash through 2009, which would obviously help.
Can't NYTCO just borrow more money from someone else or issue some commercial paper or something? This will be tough. The reason the company has drawn down its first short-term credit line is that it got shut out of the commercial paper market. On getting another loan from someone else...would you lend NYTCO more money right now? (There are certainly terms under which we would, but they are not terms that NYTCO would like very much.)
Conclusion
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.
ping
http://www.nytimes.com/2008/11/10/business/media/10mgm.html?ref=business
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They chose the Republican candidate for President.
They chose the Democrat candidate for President.
They ensured a Democrat win.
Yeah, they’re a dying dinosaur.
More like a wounded tiger in the tall grass. And they just put in office the tyrant who will kill all of their opposition and ensure their monopoly once again.
I’m sure that the NYT’s friends in Al Qaeda or perhaps Iran could see fit to send the Slimes a few million to keep them afloat, seeing that they are the primary source of leaks of top secret U.S. defense information.
so - at what point would be a good time for someone to step in and takeover?
A conservative - or a pool of conservatives?
I agree. The occupation media elected Obama.
I don’t think it a good idea. Paper information distribution systems (newspapers) will go the way of the Dodo Bird, save for local shoppers and weeklies. If a conservative newspaper were a viable business model, the Washington Times would be making money hand over fist. It’s struggling along with the liberal papers.
We conservatives should concentrate on utilizing the new media.
I find your posts on this general subject heartening. Thanks!
http://www.mediapost.com/blogs/on_media/?p=295
Great (Media) Depression Looms
Bailout for the propaganda organs of the DNC.
Ahh. Now this is something sweet to wake up to.
“We conservatives should concentrate on utilizing the new media”
I have been wondering how it would pan out if there were a conservative takeover of cultural staple like the NYTimes.
And if we are correct that their bias is the cause of their decline - wouldn’t they perform better with a different business model?
Same is true for the tv networks.
I get the impression we conservatives tend to gather in our own little corners and we aren’t venturing out and battling them on their own turf.
This is how they’ve hurt us so bad - they became dominant in education -in journalism - and now we’ll see them appointed as judges throughout the nation.
They are a bunch of busy bees - and we are too - but we seem to concede to them in certain areas.
Maybe Obama will pay them for their support and help out a bit.
It cannot happen too soon.
Of course, by then, the Obamaloons will hire all the incompetent staff for the new “National People’s Newspaper”.
Hopefully the NY Times and the Unions will be out of work soon.
The only conservative politician in my lifetime that was able to go around them with any degree of success was Ronald Reagan. And folks like him don’t come along very often.
The Dinosaur Media cannot be rehabilitated - only exterminated.
And yet he did show that it “could” be done.
And what if we didn’t rely on waiting for another Reagan?
What if conservatives decided to pool our resources?
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