Can the Times Pay the Rent?

Mar 11, 09 | 10:10 AM   byMichael Wolff
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The byline of the theoretical next heir of the New York Times has begun appearing in the paper. His name is Arthur Gregg Sulzberger—A.G. to you—and his situation is achingly existential, caught as he is between cosseted past and harsh future, his career and reason for being hanging wholly hostage to the recession’s depth. And, too, his father’s cleverness—something for which his old man has never been noted.

The New York Times has a billion dollars in debt, $400 million coming due in May and an additional $300 million by March 2010. If the unprecedented drop in advertising continues, it is reasonable to presume that the Times will default on its obligations before March 2010—unless it can somehow come up with the cash to operate the company and to hold off creditors until a meaningful recovery begins.

Its most recent move was announced earlier this week: The Times agreed to a sale and lease-back arrangement of its new building. The terms of this deal were reported by the Times, with little analysis from other sources. The Times said that it had sold its interest in the building for $225 million, and that it will lease back the space it needs for approximately $35 a square foot. Now, that rent is about half the market rate, even in the recession. In order to get such a favorable rent the Times had to sell the building at way under market value. On top of that, the deal provides that the Times can buy back the building for little more than it sold it in 10 years. So what’s in it for the buyer? Why would it be doing a deal that depends on an economically troubled company being able to pay its rent? This is easy: It’s hoping the Times will go under, enabling it to get rid of its under-market tenant, but keep the building it bought at an under-market price. It’s counting on the Times to collapse.

(Arthur Sulzberger Jr. AP Image)

Earlier this year, the Times borrowed $250 million from a Mexican media mogul of dubious provenance, Carlos Slim. Slim’s loan carries a 14% interest rate. Since he’s worth $60 billion or something, it is likely not the 14% he’s interested in, however usurious, but the advantageous position he’s in if the Times defaults—at which point he might well be able to take over the paper, or force its sale to trophy buyers. Most companies seek to do business with other companies who benefit from their success—everybody roots for everybody else. The Times, on the other hand, has been reduced to making deals with people who have a vested interest in its failure.


That’s a vicious circle to be standing in.

Among journalists, who know little about business, it continues to be noted that the Times’ ultimate defense is that the Sulzberger family, eternally dedicated to the Times’ independence and to protecting the Times’ historic standards of journalism, holds an absolute lock on the voting control of the Times.

But in bankruptcy the Times’ voting control ceases to have any weight. The Sulzberger family’s class of stock loses its standing, along with all the other shareholders. It is the creditors who rule: Carlos Slim and its landlord and the banks and anybody else who might hold, or be buying up, the Times' debt.

This is A.G. Sulzberger’s inheritance. Where will the fates leave him?

More of Newser founder Michael Wolff's articles and commentary can be found at, where he writes a regular column. He can be emailed at

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