NEW YORK, April 29 (Reuters) - Standard & Poor’s on Tuesday cut the New York Times (NYT.N) debt rating to one notch above junk status, citing a worsening decline in newspaper advertising revenue.
The outlook on the rating is negative, signaling the likelihood of another downgrade over the next two years.
S&P cut the Times’ corporate credit rating by one notch to “BBB-minus,” the lowest investment grade, from “BBB.”
The Times, which also owns the Boston Globe and more than a dozen small U.S. daily papers, has been trying to find ways to fight a persistent drop in ad revenue, building its Internet business and cutting costs.
Earlier this month, it posted a surprising first-quarter net loss as the economic downturn added to pressure on newspaper advertising. For details see [ID:nN17377871].
S&P said it expects the company’s online revenues to begin to offset print revenue declines over the next several years.
“We believe online revenue will grow to 15 percent of total revenue by 2009,” S&P said. “We also anticipate relatively stable circulation revenue (which together with online revenue is expected to make up almost 40 percent of total revenue).”
Still, the rating agency said it expects a total revenue decline “in the mid-single-digit percentage area” this year.
The cost of protecting the Times’ debt with credit default swaps fell on Tuesday to about 227 basis points, or $227,000 a year to protect $10 million of debt, down from 255 basis points on Monday, according to Markit Intraday. (Reporting by Dena Aubin; Editing by Tom Hals)