New York Times to mortgage headquarters to avert debt default
09 Dec 2008
The iconic 157-year old New York Times (NYT), the third largest newspaper in the US that is facing the brunt of the global meltdown, is planning to borrow $225 million with its spanking new mid-Manhattan headquarters building as collateral to meet its $400 million debt obligation, due in five months.
NYT said that its parent company has two revolving lines of credit, each possessing "a ceiling of $400 million, roughly the amount outstanding on the two combined," with one of the lines is set to expire in the next five months and it is unlikely that banks will renew the credit line in the current depressing economic scenario.
According to the NYT report, the company has hired the services of Cushman & Wakefield, the real estate firm to act on its behalf to mortgage or make a sale-leaseback arrangement of its share in the Times headquarters building in order to raise $225 million that it presently requires.
The Gray Lady, as the NYTs is commonly called, had moved to the new 1.5 million-square-foot state of the art skyscraper in Manhattan a year ago from its old headquarters located just a few block away. The company owns 58 per cent of the structure and the estimated value of its share in the building is estimated in the range of $850 million to $1 billion although, before property prices crashed in the US.
Catherine Mathis of the NYT said that the company will borrow only $225 million although that is not the market value of the building.
Currently, the company has $46 million in cash at hand to run its operations, which will dwindle fast by the next quarter and it has no resources of raising funds from the commercial paper market although it still has the $366 million second line of credit which is still untapped, but given the current economic gloom it is highly possible that banks, who themselves are facing liquidity crunch will look at ways to renege on this by reading out clause not binding them to pay, which is usually in fine print of the credit contract.
The New York Times Co, which is controlled by the family of its chairman, Arthur Ochs Sulzberger Jr. has other assets, which include the International Herald Tribune and The Boston Globe, About.com, has a minority stake in Red Sox besides publishing 18 other newspapers.
NYT Richard Pérez-Peña who was given the unpleasant job of breaking this news, lest the company be accused of not being objective, writes "Standard & Poor's recently lowered its credit rating on the Times Company below investment grade, and Moody's Investors Service has said it was considering a similar move. Times Company stock, which has lost more than half its value this year, closed on Friday at $7.64, down 30 cents."
Executive editor, Bill Keller has said that the company will cut cost but will not fire anyone at the newspaper in wake of declining ad revenues with readers preferring online editions which are free.
