The New York Times Co. is striking back (in letter form) against Michael Hirschorn's excellent Atlantic essay on the paper's gloomy immediate future. Below, a factual look at the NYT Co.'s financial future:
Hirschorn's essay was commendable mainly because he refused to dismiss the more negative possibilities facing the Times; in fact, he realized how likely an extremely bad near future is, and gamed out just how the paper might rebound from a terrifying financial crisis without totally sacrificing itself. It would actually be a very useful piece for NYT execs to ponder. But most of the backlash against it has focused on his doomsday scenario, which not even Hirschorn really believes is going to happen: "what if The New York Times goes out of business—like, this May?"
No, it won't, but basing your argument on that fact is pointless. He said for effect. Specifically, one of the company's two $400 million credit agreements expires in May, and Hirschorn is pointing out that the paper could be facing a severe credit crisis when it does:
With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company’s debt was recently reduced to junk status), the paper’s future doesn’t look good.
We have two revolving credit agreements.
These are agreements with banks that allow us to borrow up to $400 million under each agreement, or $800 million in total, whenever we need it. We repay what we have borrowed as cash comes in and the amount we can borrow is then replenished.
One of our agreements will expire in May 2009 and the other in June 2011.
As we have said publicly on more than one occasion, because we believe we need significantly less than the total $800 million available credit, we do not plan to replace the full $400 million that is expiring in May. There is no need to do so.
More accurately, there is no ability to do so. [We've emailed Mathis to try to confirm how much credit the company can get after that credit line expires, and we will update accordingly]. Essentially, the Times is having its credit card limit lowered.
Mathis also disputes Hirschorn's characterization that the company is borrowing money against its new headquarters building (up to $225 million) to pay back debt. It's actually a "Sale-leaseback" deal. This is hair-splitting.
These are the NYT's only two concrete objections to Hirschorn's article. The rest of Mathis' letter contains generalities about the Times' bright future. Neither of those two objections changes the fundamental fact that the company is full of debt with no clear way out, at the moment. Does that mean a way out will not be invented or negotiated? No. Does that mean the company will automatically fail or be sold? No. But it does mean that the Times is facing very real threats to the way it's done business and practiced journalism for the last century, and if it doesn't come up with a new and drastic plan soon (one halfway thought-out suggestion here), it will simply follow this road to oblivion.
The company has assets in Boston to sell. It has About.com to sell. But selling assets off to raise cash to pay debt while revenues continue to decline is not a great long-term strategy. Yes, the company has a dual-class stock structure which theoretically gives the Sulzberger family complete control, and protects it from any outsider swooping in to buy it. So what? The facts of the company's financial decline are what ultimately matter, not who oversees it.
Read Hirschorn's piece, then read Mathis' letter, then look over the NYT Co's financials, and then come up with a plausible scenario for this company getting through the next several years unscathed. I can't.