TEXT-S&P says NY Times ratings unaffected by group sale

Aug 22 - Standard & Poor's Ratings Services said today that its ratings on The New York Times Co. (B+/Stable/--) are unaffected by the company's recent announcement that it is engaged in discussions regarding the potential sale of its About Group, which has been underperforming. Revenues of the About.com business unit dropped 16% in the first half of 2012 because of the continued effects of last year's Google search algorithm changes. About Group's EBITDA fell 38% over the same period because of the sharp decline in revenues, while expenses slightly increased due to investment aimed at restoring revenue growth.

The rating outlook remains stable, as potential long-term credit profile improvement could be hampered by the continued secular decline in print advertising revenues despite efforts to increase the contribution from the company's digital revenue streams. Also, the potential sale of the About Group, if proceeds were added to the company's already sizable cash and short-term investments balances of $570 million at June 24, 2012, would increase the dependence on the core print advertising business and result in higher gross debt leverage. Pro forma gross leverage would rise to roughly 4.7x from 4.1x for the 12 months ended June 24, 2012, adjusted for the January 2012 $143 million sale of the underperforming regional newspaper group, operating leases, and the company's underfunded pension obligations. We consider the probability of an upgrade or downgrade unlikely over the near term. We would consider an upgrade to 'BB-' over the intermediate term if the company can establish a trend of steadily increasing digital revenue to offset publishing revenue declines, leading to consistent EBITDA growth, and if it balances shareholder returns and acquisitions with debt repayment.