The New York Times raises $250 from Carlos Slim
20 Jan 2009
Even as newspapers around the world experience declining sales and lower advertising revenues, one of the richest men in the world has apparently found in the medium a sound investment (See: Troubled NYT may find Slim lifeline).
The New York Times Company said Monday it had reached an agreement with the Mexican billionaire Carlos Slim Helú for a $250 million loan intended to help the newspaper company finance its businesses. The possibility of this development had already been explored in an earlier article.
Under the terms of the deal, Slim, who already owns 6.9 per cent of the Times Company, would invest $250 million in the form of six-year notes with warrants that are convertible into common shares, the company said in a statement. The notes also carry a 14 per cent interest rate, with 11 per cent paid in cash and 3 per cent in additional bonds. The Times announced late Monday the financing agreement with Slim's companies Banco Inbursa and Inmobiliaria Carso for $125 million each.
The terms of the deal could be similar to those insisted upon by Warren Buffett, when he invested billions in Goldman Sachs Group Inc. and General Electric Co., with the promise of 10 per cent annual dividends. Slim first approached the Times Company in November, people briefed on the discussions said. (See: Warren Buffett invests $3 billion in GE's $15-billion capital raising)
The Times, which also publishes The Boston Globe and International Herald Tribune, has been trying to conserve cash as advertising revenues continue to slide. Newspaper publishers across the country are hurting amid the economic downturn and as advertisers shift spending online. The Times slashed its quarterly dividend by 74 per cent in November and plans to raise $225 million from its new, 52-story Manhattan headquarters, either by selling the building and leasing it back or borrowing against it. It also put its stake in the Boston Red Sox up for sale.
''This agreement provides us with increased financial flexibility to continue to execute on our long-term strategy,'' Janet L Robinson, chief executive of the Times Company, said in a statement. ''We continue to explore other financing initiatives and are focused on reducing our total debt through the cash we generate from our businesses and other decisive steps.''
Slim would get no representation on the Times' board, and no special voting rights. But when he exercises the warrants, he would own up to 17 per cent of the company's common stock, becoming its largest shareholder, the Times reported. The Ochs-Sulzberger family owns about 19 per cent of the company but controls it through a special class of supervoting shares.
Slim, one of the wealthiest people in the world, controls phone companies and has major investments in retailing, construction, banking, insurance, railroads and mining. In March, Forbes magazine estimated his fortune at $60 billion.
Slim got his start in the cigarette business and made it big in 1990, taking control of Mexico's state-owned telephone monopoly. Telefonos de Mexico SA, or Telmex, still operates more than 90 per cent of the nation's fixed-line phone services, while his America Movil SAB is Latin America's largest mobile phone service provider.
