New York Times Co. said Monday that it had reached an agreement for $250 million in financing from companies controlled by billionaire Carlos Slim Helu to help the newspaper publisher meet debt payments as credit markets dry up and the newspaper industry confronts plummeting ad revenue.
Banco Inbursa and Inmobiliaria Carso will issue senior unsecured notes due in 2015 with detachable warrants, New York Times said. The publisher plans to use the funds to refinance existing debt, including $400 million borrowed under a revolving credit facility that matures in May.
The loan gives New York Times increased financial flexibility, and the company will continue to work toward reducing debt, Chief Executive Janet Robinson said. The company slashed its dividend last year and is pursuing asset sales to raise cash.
It plans to raise $225 million from its new 52-story Manhattan headquarters, either by selling the building and leasing it back or by taking out a mortgage. The company owns 58% of the building, a portion that has not yet been mortgaged. The company also put its stake in the Boston Red Sox up for sale.
"They need all of the fuel they can get to keep going," said Richard Dorfman, managing director of investment firm Richard Alan Inc. Dorfman, who spoke before the announcement, said he sold the remainder of his stock in New York Times in December.
The company is grappling with an industrywide migration of advertisers and readers to the Internet, coupled with a recession that's forcing U.S. businesses to reduce marketing. Last week the Minneapolis Star Tribune filed for bankruptcy, joining Los Angeles Times owner Tribune Co., which sought protection from creditors Dec. 8.
New York Times had about $46 million in cash and $1.1 billion in debt as of the end of September, the paper reported.
Mexico's Slim, 68, holds 6.9% of New York Times Class A shares, making him the third-biggest investor outside of the controlling Ochs-Sulzberger family. At the time of his initial investment, Slim cited the company's attractive value.
Before the deal was announced formally, New York Times said Slim would get no representation on the company's board or special voting rights. But when he exercises the warrants, he would own about one-third of the company's common stock, becoming its largest shareholder.
New York Times shares closed at $6.41 on Friday. They have fallen 13% this month.