10-Q Watch: NYTCo Takes $166 Million Writedown For New England Media Group; Faces $400M Refinancing

imageThe New York Times Company (NYSE: NYT) filed its 10-Q with the SEC Friday and it’s not a pretty sight. The company projected a $140-150 million write down for the New England Media Group when it reported Q3 results Oct. 23; the number reported in the 10-Q is $166 million with adjustments to come in Q4. That puts the Q3 loss for the News Media Group at $153 million and the overall loss for Q3 slightly over $106 million.

The company has two $400 million revolving credit agreements, one due in May 2009 and one in 2011. S&P lowered its rating twice this year, the second time below investment grade; Moody’s has lowered its rating once and serviced notice that it may do so again. As we reported recently, NYTCo isn’t in danger of breaching its covenants; there are also no accelerated payments subject to ratings downgrades. But the downgrades do make financing trickier and more expensive — and they almost certainly guarantee that the company faces more restrictive covenants. From the 10-Q: “We are evaluating future financing arrangements and are in discussions with our lenders regarding the expiration of one of our credit agreements, scheduled for May 2009. Based on these discussions, we expect that we will be able to manage our debt and credit obligations as they mature.” (For the dramatic interpretation, read this from SAI while listening to Celine Dion. Update: Should have added that one of SAI’s investors is Kohlberg Ventures, which is run by James Kohlberg, one of the dissident shareholders appointed to the NYTCo board.)

During the Q3 call, CFO James Follo said the board is exploring reducing dividends and this was repeated in the filing. Given what we’ve seen of late at other companies, reducing or eliminating the dividend likely will be a prerequisite. So far this year, NYTCO has paid out nearly $100 million in dividends; including that amount, the company has paid shareholders roughly $420 million over the last four years. The board even increased the per share amount by $.55 in mid-2007 and has used the credit lines to pay dividends.

Cost cutting: One area where the NYTCo plans to save money: retiree health costs. In late October, the company amended its retiree medical plan to eliminate post-age 65 benefits and to reduce the company’s contribution for non-union employees next year. Estimated savings: about $24 million in 2009. Other changes should reduce pension and benefits obligations by roughly $90 million.

Photo Credit: Robert Scoble


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