(Adds action by Standard & Poor's, rewrites throughout)
NEW YORK Oct 23 Standard & Poor's on Thursday
slashed its ratings on the New York Times Co (NYT.N) into junk
territory and cited concerns about the newspaper publisher's
revenue outlook, after it posted a third-quarter loss.
Moody's Investors Service also said it may follow the move,
adding the publisher faces risks in refinancing its debt.
The New York Times posted a quarterly loss from continuing
operations on Thursday and said advertising revenue at its news
media group dropped 16 percent for the quarter. For details,
S&P said a likely U.S. recession will exacerbate declining
advertising revenues and prolong the time until the declines
will be made more manageable, possibly until 2010.
Until advertising declines are moderated the publisher will
not be able to execute revenue strategies and cost cutting
measures that are key to stabilizing its earnings, the rating
"It is our estimate that the company's total revenue will
decline in the mid-teens percentage area in 2008 year over
year, and that earnings before interest, taxes, depreciation
and amortization (after buyout expenditures) will decline by
more than 30 percent in 2008 and by about an additional 30
percent well into 2009," S&P said.
It cut the Times' rating three notches to "BB-minus," three
levels below investment grade, from "BBB-minus." The outlook is
negative, indicating an additional cut may be likely over the
next one-to-two years.
Moody's said it may cut the company from "Baa," the lowest
Rating downgrades into junk territory can substantially
increase a company's borrowing costs.
Newspaper advertising market conditions are likely to
remain challenging in 2009 and continuing revenue declines will
make it difficult for the company to bring its credit metrics
in line with its investment-grade rating, Moody's said in a
It will also make it hard for the publisher to execute its
plans to improve liquidity, Moody's added. Risks from
refinancing maturing debt also prompted the review for
downgrade, the rating agency said.
The Times said it is looking for ways to reduce its debt,
but said it is a difficult time to make asset sales.
The cost to insure the company's debt with credit default
swaps rose to 501.5 basis points on Thursday, or $501,500 per
year for five years to insure $10 million in debt, from 460
basis points on Wednesday, according to Markit Intraday.
(Reporting by Karen Brettell; Editing by Diane Craft)