The deal in which the New York Times gets an investment of $250 million from the Mexican mobile phone mogul Carlos Slim isn’t good news.
Mr. Slim’s dough is needed to meet the Times' upcoming debt obligations.
The deal follows the company’s earlier effort to raise money by borrowing on its new building—but that was a problem because any lender would have the Times itself as a tenant and the Times is less and less creditworthy. The next notion was to sell its interest in the Boston Red Sox, but the Times holds only a minority stake in the team (i.e. it’s got no power) which, ultimately, is not worth much more than the price of good seats.
Hence, the Times was forced to turn to Slim—who already owns a big chunk of Times stock and who’s made his gargantuan fortune ($60 billion) in the internecine politics of Mexico, where the government granted him a mighty monopoly—and forced to pay him 14% interest for his money. This is more than $30 million a year—more than the New York Times Co., after walloping losses at its subsidiaries, the Boston Globe, the International Herald Tribune, and assorted other papers (the Times itself actually turns a little profit), makes.
(AP Image)
In other words, it will have to struggle to pay Mr. Slim by taking dividends from the mouths of its shareholders, including the Sulzberger family, which not only controls the paper but subsists on it. (In fact, the Times has already cut its dividend this year from 23 cents to 6 cents, to save $100 million. The third quarter loss was $106 million, and, according to the company’s own projections, it isn’t likely to post a profit for 2008.)
If advertising revenues continue to plunge—and there is almost no scenario in which this will not happen—the company could well find itself in default to Mr. Slim, or desperate for yet another savior. At that point, the price won’t be 14%, it will be its independence.
The Slim deal, following by just a few days news of an offer for the Evening Standard in London by the Russian banking tycoon and former-KGB officer Alexander Lebedev, suggests a curious fate for the world’s prominent newspapers—they’ll be bought by foreign oligarchs, those eager protectors of a free press.
michael@newser.com
