New York Times falls on Slim's expensive loan
New York Times Co (NYT - News) shares fell on Tuesday after the company agreed to a pricey $250 million loan from Mexican billionaire Carlos Slim that it will use to repay debt coming due in May.
The loan is part of a package that would give the telecommunications tycoon a prominent financial role in the Times, one of the most famous newspaper publishers in the world, but one that has been struggling to fix its financial difficulties amid a sharp drop in advertising revenue.
Most importantly for the Times, it allows the publisher, under family control for more than a century, extra time to find ways to sell assets and improve its business.
Times shares fell 50 cents, or 7.8 percent, to $5.91 on the New York Stock Exchange, worse than the 3 percent drop in the Dow Jones Industrial Average on Tuesday afternoon.
The agreement, announced on Monday night, is for 6-year unsecured notes with a 14-percent interest rate, with 11 percentage points paid in cash and 3 percentage points in accrued interest.
"Frankly, New York Times should be pleased they were able to get this financing at all, in our view, given all the pressures going against the company," Barclays Capital analyst Craig Huber wrote in a note to investors.
"Nevertheless, the interest rate is very expensive on an absolute basis and is not a good sign for peer newspaper companies should they try to follow suit in the debt markets," Huber wrote.
The deal gives Slim warrants to buy 15.9 million New York Times Class A shares, which, when added to the 6.9 million shares that he already owns, would make him one of the largest Times shareholders with 17 percent of the stock. The loan pays a dividend, but does not give Slim a board seat.
The Times has $1.1 billion in debt and $46 million in cash.
Ehem. 14 percent loan. Good luck collecting Carlos.
Chant with me: Sink NYT - Sink. (like Drill Baby Drill, or Burn Baby Burn)