NEW YORK, July 23 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
(Reporting by Karen Brettell; Editing by James Dalgleish)