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Mexican Billionaire Puts the Squeeze on The NY Times

Remember the news back in January about the sudden arrival of Carlos Slim Helu and his extended clan from South of the Border as the purported saviors of The New York Times, then staggering under a debt load that was threatening to break the back of the old gray lady?

The terms of the deal as revealed by The Times then were sparse -- a quarter-billion in cash from Slim in exchange for warrants that would allow him to become the largest holder of common stock in the newspaper company.

This week, as the company filed its 10-Q with the SEC, new conditions attached to the loan finally came to light. When I read it yesterday, the first detail that popped out at me was the staggering rate of interest Slim extracted from the Times -- 14 percent!

But there is much more buried in there, and with a tip of the hat to one of those bloggers Timesmen hate the most, Henry Blodget, for his detailed examination of the filing yesterday, here's a summary in layman's terms of what the billionaire imposed on The Times:

  • The Times had to pay an "investor funding fee" of $4.5 million upfront to Slim.
  • That annual interest rate on the $250 million of 14 percent means that over the six year term of the loan the company will have to pay around $210 million in interest (or 84 cents on the dollar) for using Slim's dough.
  • Slim holds warrants to purchase almost 16 million shares of common stock at a price of $6.36/share, meaning he would own 10 percent of the company (this is a lower holding, by percentage, than originally reported in January) should he choose to exercise that option.
  • The company is prohibited from incurring any additional debt until 2010, and then only if its financial health is such that it does not exceed a "fixed charge coverage ratio" of 2.75 to 1.
  • The Times cannot mortgage property or sell off assets like its stake in the Boston Red Sox except under strict conditions that place Slim at the head of the line to seize said assets or incoming cash before other creditors should the company begin a slide into bankruptcy.
If this sounds perilously close to usury, it's also an indication of just how desperate The Times was for the loan. All of which caused Editor & Publisher blogger Fitz over at Fitz&Jen to wag:

Blodget's Good News: New York Times Co. Bankruptcy Might Not Come Until 2011.

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