Saturday, November 15, 2008

Has The Times Run Out Of Time?

In May, NYTCO owes its lenders $400 million. As of now, it has $40 cash on hand. Where will the rest come from to stave off a bankruptcy filing? That's not a corporate-governance question you'll see answered in the business section anytime soon.

Henry Blodget, the former Merrill Lynch analyst who writes "Silicon Valley Insider," has been carefully monitoring the company's bleak financial condition for a while now. In October, even before the latest spate of bad news, he'd been advising the Time to consider the sale of its stake in its new office building, or its ownership position in the Boston Globe or the Red Sox.

Every day it doesn't head Blodget's advice, it heads deeper into debt.

A cogent analysis posted on Blodget's site last Saturday (and not picked up anywhere by the mainstream press) made clear that the Times could pull off a Hail Mary pass to save itself:

Will this cash crunch force the New York Times into bankruptcy? No. (Or at least not yet.) The company still has assets, and it is not yet burning so much cash that it can't take steps to save itself.

Those steps are likely to be unpleasant, though. And they will be taken at gunpoint.

Blodget proposes a three-step plan for a short-term financial fix.

First, the company must sell assets: again, he recommends the money-bleeding Globe, the Red Sox or its spanking-new office tower, which loses value by the day. (Times staffers need not fear for their beloved new cubicles and cafeteria; the company would lease back its office space from the new owners.

Second, he suggests that NYT draw down on its $366 million second credit line -- not an easy maneuver at time when banks are cash-strapped themselves.

Third, Blodget argues (yet again) for cutting -- or better yet, eliminating -- the company's cash dividend. This won't translate into cash, but Blodget believes it might persuade a potential lender that NYTCO has acquired some business sense.

In previous posts, Blodget has also made the case for more layoffs at the paper; he strongly believes in the Times's digital future and feels website staff cuts will help deliver profits that advertising won't necessarily provide.

Like most realists, Blodget has only painful solutions to propose to extricate the company from its current mess. But given the severity of NYTCO's condition, is there any other answer?

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