New York Times Co. Kicked Into Junk Territory By Moody’s

Fitz: The New York Times Co.’s debt is junk, Moody's Investors Services said Friday.

Moody’s had been the last major credit rating firm that still had an investment-grade rating on the Times Co. Last October, Standard & Poor’s Ratings Services assigned speculative-grade ratings to Times Co. debt.

Moody’s action Friday took Times Co.’s "corporate family rating" and the rating on its senior unsecured debt down three notches to Ba3 from Baa3, Moody's lowest investment-grade rating. Moody’s downgraded Times Co. commercial paper to Not Prime from P-3, and said it would no longer rate its commercial paper.

And while Moody’s suggested Carlos Slim Helu’s $250 million loan earlier this week will help the Times Co.’s liquidity situation -- it still assigned speculative-grade liquidity rating of SGL-3.

E&P’s story on the downgrade is here. And the full note from Moody’s Vice President and Senior Analyst John Puchalla is below the fold:

New York, January 23, 2009 -- Moody's Investors Service downgraded The New
York Times Company ("NY Times")'s senior unsecured rating to Ba3 from
Baa3, the commercial paper rating to Not Prime from Prime-3, and
assigned the company a Ba3 Corporate Family Rating, Ba3 Probability of
Default Rating, and SGL-3 speculative-grade liquidity rating. The
commercial paper rating will be withdrawn. The rating actions conclude
the review for downgrade initiated on October 23, 2008. The rating
outlook is negative.

The summary of rating actions is as follows:

Assignments:

..Issuer: New York Times Company (The)

....Corporate Family Rating, Assigned Ba3

....Probability of Default Rating, Assigned Ba3

....Speculative Grade Liquidity Rating, Assigned SGL-3

Downgrades:

..Issuer: New York Times Company (The)

....Senior Unsecured Commercial Paper, Downgraded to NP from P-3 (will be
withdrawn)

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 (LGD4 -
57% assigned) from Baa3

....Senior Unsecured Medium-Term Note Program, Downgraded to Ba3 from Baa3

....Senior Unsecured Shelf, Downgraded to (P)Ba3 (LGD4 - 57% assigned)
from (P)Baa3

Outlook Actions:

..Issuer: New York Times Company (The)

....Outlook, Changed To Negative From Rating Under Review

The downgrade reflects Moody's expectation that ongoing deterioration in
newspaper advertising revenues will continue to place significant downward
pressure on NY Times' EBITDA despite aggressive cost management, and
that the earnings decline along with a significant increase in the
underfunded pension liability will weaken credit metrics considerably.
Moody's anticipates revenue and EBITDA (after buyouts and excluding City
and Suburban operations from 2008) will decline by approximately 10% and
30-35%, respectively, in 2009 with only modest improvement in 2010. In
Moody's opinion, earnings pressure and higher cash interest costs will
limit free cash flow generation in each of the next two years
notwithstanding a significant reduction in capital spending, and the
recent 74% cut in the dividend. Moody's expects debt-to-EBITDA leverage
will exceed 6.0x in 2009 and 2010 (incorporating Moody's standard
adjustment and including an estimated $750 million under-funded pension
position for year-end 2008). However, Moody's expects that NY Times will
steadily reduce leverage over time to a level that is more consistent
with the Ba3 CFR. Moody's also anticipates in the Ba3 CFR that NY Times
will address liquidity needs in a timely manner.

The SGL-3 speculative-grade liquidity rating reflects Moody's belief that
NY Times has adequate cash, projected cash generation, and unused
committed revolver capacity to fund operating needs and $99 million
medium term notes maturing in November 2009. The recent $250 million note
offering placed with affiliates of Carlos Slim Helu improved the
company's liquidity position by increasing unused capacity on its $400
million committed revolver (maturing June 2011) by an amount sufficient
to cover its 2009 maturities and the majority of the $250 million note
maturing March 15, 2010. The liquidity rating could be lowered if cash,
projected free cash flow and unused committed revolver capacity are not
sufficient to fund the March 2010 maturity. The company is considering a
possible sale-leaseback of up to $225 million on its headquarters
building, asset sales, and other actions to enhance liquidity.

The Ba3 rating reflects NY Times' significant global news and information
infrastructure that supports high quality content, strong brands, and
the company's position as a leader in prioritizing the national daily
news agenda. The content appeals to a large and affluent customer base
that is attractive to advertisers at premium ad rates (print and online)
and generates a higher percentage of subscription revenue than newspaper
industry peers.

The negative rating outlook recognizes the potential for further weakening
of NY Times' operating performance in an unfavorable advertising
environment, exacerbated by secular pressure facing newspaper companies.
In Moody's opinion, downward rating pressure will persist until the
company is able to stabilize revenue, reduce its cost structure and
apply cash flow and asset sale proceeds toward debt reduction, such that
credit metrics show improvement from current levels.

Moody's last rating action on NY Times was on October 23, 2008, when
Moody's placed the company's ratings on review for possible downgrade.

For the assignment of this rating, Moody's has used its methodology for
the Global Newspaper Industry, which can be found at www.moodys.com in
the Credit Policy & Methodologies directory, in the Ratings Methodologies
subdirectory. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Credit Policy & Methodologies directory.

NY Times is a New York-based media company with operations in newspaper
publishing and information services. The company operates The New York
Times, the International Herald Tribune, The Boston Globe, 15 other daily
newspapers, and more than 30 Web sites including NYTimes.com and
About.com. Annual revenue approximates $3.0 billion.