Carlos Slim's $250 million investment in the New York Times Co. yesterday may have eased the company's immediate financial pressures, but it apparently wasn't enough to calm investors, who sent the stock down 50 cents, or 7.8 percent, to $5.91 on Tuesday. The loan gives Slim 15.9 million Class A shares. If those shares were converted to stock, the Mexican billionaire could have a 17 percent stake in the NYTCo (NYSE: NYT). The company plans to use proceeds would be used to help cover the $400 million credit facility expiring in May. NYTCo execs also hope the investment will buy time to devise other ways to gain more financial flexibility as the company wrestles with roughly $1.1 billion in debt.
Reuters: Analysts are concerned that the 14 percent interest on Slim's loan is too high. Wachovia analyst John Janedis said the rate would ultimately translate into an incremental $21.9 million in interest payment, or 9 cents a share, on the company's books. As such, the high rate should send a signal to other newspaper publishers that the credit markets are not going to be the place to get their finances in order. Still, Barclays analyst Craig Huber said the NYTCo should be happy that they were able to get this financing done at all, considering the weight of its financial troubles.
By David Kaplan