S&P may cut New York Times debt into junk territory

NEW YORK, July 23 Wed Jul 23, 2008 10:10pm BST

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NEW YORK, July 23 (Reuters) - Standard & Poor's on Wednesday said it may cut its ratings on New York Times Co (NYT.N) into junk territory, as the newspaper publisher struggles to overcome declining revenues.

New York Times said on Wednesday its quarterly profit fell with a 12 percent decline in newspaper advertising, but results beat Wall Street forecasts on cost cuts and higher newspaper prices. For details, see [ID:nN23454228]

The review for downgrade "reflects an accelerating pace of total revenue decline and a rate of decline in earnings before interest, taxes, depreciation and amortization (EBITDA) in the first half of 2008 that indicates the company may have difficulty achieving our expectations for the current rating," S&P said in a statement.

"This is notwithstanding our understanding that The New York Times is attempting to lower its cost base by more than $130 million in 2008," S&P said.

The cost to insure New York Times' debt with credit default swaps rose by around 24 basis points after it reported earnings to 387 basis points, or $387,000 per year for five years to insure $10 million in debt, according to Markit Intraday.

New York Times is currently rated "BBB-minus," the lowest investment grade. A rating cut into junk territory generally leads to a significant jump in the cost of issuing debt.

"The current 'BBB-minus' rating incorporates the expectation that total revenue declines would not exceed the mid-single-digit area this year, and that EBITDA declines would not exceed the mid-teens percentage area," S&P said.

It also depends on New York Times growing its online revenue base in a manner that can begin to fully offset print revenue declines over the next two years and on EBITDA generation stabilizing over this time frame, the rating agency added. (Reporting by Karen Brettell; Editing by James Dalgleish)

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