US CREDIT-NY Times debt may outperform as maturities scarce

By Karen Brettell

NEW YORK, Feb 11 (Reuters) - The New York Times Co's
(NYT.N) bonds are likely to outperform those of its peers as
the newspaper publisher boosts cash flow, pays down debt and
benefits from a lack of near-term debt maturities.

The Times on Wednesday posted a higher than expected profit
and said that it has cut its debt by more than $290 million to
$836 million at the end of 2009.

Credit default swaps insuring the Times' debt tightened to
238.5 basis points on Thursday, or $238,500 per year to insure
$10 million in debt for five years, from 248 basis points
before the earnings, according to Markit Intraday.

Barclays Capital changed to an overweight recommendation on
the Times' debt, while credit research firm Gimme Credit also
moved to a buy recommendation on its bonds maturing in 2015.

The Times has paid down debt and improved revenue after
coming under pressure last year when it needed a $250 million
investment from Mexican billionaire Carlos Slim to repay a $400
million credit facility.

The publisher now has only $67 million in letters of credit
outstanding under that facility, and its next major bond
maturity is not until 2015. The Times also has $75 million in
unsecured debt maturing in 2012.

"New York Times has de-risked its balance sheet
significantly," Barclays analysts Hale Holden and Danish
Agboatwala said in a report. "This should provide a positive
technical for CDS, particularly compared with Belo, Gannett,
and IPG, all of which have more debt due within the next five
years."

Credit default swaps on the debt of Belo Corp (BLC.N),
Gannett Co (GCI.N) and Interpublic Group of Companies (IPG.N)
traded on Thursday at 386 basis points, 392 basis points and
336 basis points, respectively, according to Markit.

Gimme Credit analyst Dave Novosel estimates that the Times
generated more than $150 million and possibly as much as $200
million in free cash flow in 2009, with much of its improvement
coming from a more than $50 million decline in capital
spending.

This cash, in addition to $45 million in proceeds from the
sale of the company's New York classical radio station, was
used to pay down its debt and pushed the company's leverage, a
measure of debt relative to earnings, to 3 times from 3.5 times
at the end of 2008, he said.

Leverage could decline further if the publisher is able to
sell its interest in the Boston Red Sox baseball team, Novosel
added.

The Times also said it expects to make a voluntary payment
of about $60 to $80 million in pension contributions this year,
even though the company does not face any mandatory
contributions.

This is positive as it would effectively count as debt
reduction, Barclays said.

Risks to the outperformance of the Times' unsecured debt,
however, are that the company may refinance its currently
undrawn credit facility, as any new bank debt would rank ahead
of the unsecured bonds, Barclays said.

(Editing by Chizu Nomiyama)