Times Takes Subprime Mexican Loan

The Times just borrowed $250 million from Mexican billionaire Carlos Slim, as anticipated. The interest rate? 14 percent. I pay less on my credit cards. Even more sad?

The money isn't enough.

The Times will give quite a bit for the honor of an investment from Slim, whose success has been chalked up to, variously, the sackfuls of money he delivered to Mexico's then-ruling party in the early 1990s, the pushing away of competitors by that party, the high prices his company charged in an impoverished telecom market (thanks again to said party), allowing his country's communications infrastructure to languish, and leveraging his Mexican monopoly into other businesses abroad.

In addition to a 14 percent interest rate —higher than one gossip-grubbing blogger's non-teaser credit card rates of 9 and 10 percent — the paper is giving Slim warrants that could be converted into stock controlling 17 percent of the Times Company, making him the third-largest shareholder behind the Sulzberger family and Harbinger Capital, with roughly 20 percent each.

The Times treats the conversion of these warrants, priced slightly below the recent stock price, as fait accompli in its coverage:

Mr. Slim will receive no representation on the company's board or any shares with special voting rights like those of the Sulzberger family, which controls the company. Nonetheless, when Mr. Slim exercises the warrants, he will be among the largest single shareholders in the Times Company, owning up to 17 percent of the common shares outstanding.

(Emphasis added.)

Though Slim's cash can be used in place of a $400 million credit line expiring in May (and never fully tapped), the Times will still owe another $249 million in 2010. And the company's revenue fell more than three times as steeply as its costs in the first nine months of 2008. Since then, the advertising market has only gotten worse, and 2009 promises to be especially brutal. Even if the Times Company can mortgage its office and sell off assets like About.com, it will eventually need to bring expenses in line with sales. Barring a miraculous market recovery, it's hard to see how the Times Company does that without the newsroom layoffs it said were no longer in the cards.