NY Times, McClatchy brace for tough '09

By Sinead Carew

NEW YORK (Reuters) - The New York Times Co and McClatchy Co said on Tuesday they will work to reduce debt in 2009, which is shaping up to be one of the toughest years for the U.S. newspaper industry.

A day after rival newspaper publisher Tribune Co collapsed under a mountain of debt and declared bankruptcy, the Times and McClatchy sought to reassure investors that their balance sheets were strong enough to weather the recession and slump in advertising spending.

The Times said it was in talks with lenders on debt that matures in 2009 and 2010 and it does not intend to fully replace a $400 million credit facility that expires next year as its total borrowing need is projected to be significantly less than $800 million. It has $250 million in notes due in 2010 and a $400 million debt facility due in 2011.

It added that it has started a process to borrow against the Times headquarters building in Manhattan, via a secure financing of up to $225 million, to repay long-term debt.

"While the credit markets remain challenging, we expect to secure the financing necessary to meet our maturities when they come due," Chief Executive Janet Robinson told a UBS media conference on Tuesday.

McClatchy Chief Executive Gary Pruitt also told the conference the publisher of the Miami Herald and other newspapers had made progress paying down debt in the fourth quarter and expected to do so again next year.

But both Pruitt and Robinson acknowledged the huge problems facing the newspaper industry as more readers go online for their news and as companies pull back further on advertising due to the deepening economic crisis.

"In November, the rate of change in advertising revenue declined from what we saw in October. The entertainment, real estate and automotive advertising categories were especially soft," Robinson said. "There is no doubt that 2009 will be among the most challenging years we have faced and more steps will be needed."

The Times expects its 2009 advertising rates and circulation rates to be flat compared with 2008.

LOUSY RESULTS

Pruitt described McClatchy's current results as "lousy" and said the economy appeared to be worsening.

"We recognize that part of our advertising decline is permanent -- reflecting the secular shift to the Internet. Another part is temporary -- reflecting the cyclical nature of our business in a recession," Pruitt said.

"Our current results are lousy, and the economy seems to be worsening. On the other hand, we expect in the second half of 2009 that the recession may have bottomed or perhaps the economy may even have returned to growth."

Tribune Co, owner of eight major daily newspapers and several television stations, filed for Chapter 11 bankruptcy protection on Monday after real estate mogul Sam Zell loaded it with about $8 billion in debt as part of a leveraged buyout a year ago.

Analysts said the collapse could make banks more wary about lending to the ailing newspaper industry.