Sunday, November 09, 2008

NY Times’ cash crunch solutions, including mine

Here’s Henry Blodget at Silicon Alley Insider - - -

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. . . .

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. . . .


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.

Blodget’s entire post’s here.



With all respect to Blodget, he understates the seriousness of the Times’ credit crunch.

Anything that hurts the Times will necessarily hurt its partners, the most important being the Democratic Party.

Dems must be concerned this credit crunch could start a ripple effect which would first hurt the most vulnerable Democrats in Congress, but could soon engulf the Obama White House.

A financially weakened New York Times will have a much tougher time promoting strategic Obama White House leaks meant to cast Republicans in a bad light.

The Times will also be forced to cut back on the number and “depth” of its own bogus stories attacking Republicans.

My solution is for DNC chair Howard Dean and President-elect Barack Obama to plan a series of fund-raisers for the Times.

Given how easily Obama and the Dems raise money, $400 million for their favorite newspaper should be a snap.

Hat tip: AC


Anonymous said...

There will be a move by the NYT and others to simply accept written contet from interest groups (meaning, liberal/dem funded) - we're already seeing more and more of this under the "special to . . . " bylines. Who needs a journalist staff when you can be spoonfed 'news'?

Anonymous said...

John Dean and the DNC raising money for the NYT makes sense to me, as the NYT is but a house organ of the DNC.

Better yet, I hope the NYT goes under. Kapoot to a newspaper that makes a mockery of good journalism.

Anonymous said...

The NYTimes profiled her today. She wants to be U.S. Attorney General:

Anonymous said...

Today's New York Times reports that Jamie Gorelick is being considered for Attorney General of the United States. How's that for hope and change? The person in large part responsible for the wall of separation between the intelligence community and the Justice Department prior to 9/11, the person responsible in large part for the failure of Fannie Mae, who received a sweetheart deal from Countrywide on her private residence, who helped to shuffle the books to make Fannie appear more sound when in fact it was losing millions of dollars and who helped herself to huge bonuses as a result and last but not least, the person employed to defend the actions of the rogues in the administration of Duke University in the Duke Lacrosse case is being considered by The One for the post of attorney general. You just can't make this stuff up.

Anonymous said...

Why do I think the NYT will get a big fat bailout

Anonymous said...

When the press acts as a full time paid political ad, one has to suspect that there will indeed be some form of payback. I predict taxpayer money will, one way or another, wind up covering this loss and preventing the loss of a high-profile, in-the-tank propaganda outlet.