Peter Kafka

Recent Posts by Peter Kafka

Can Mexican Billionaire Carlos Slim Save The New York Times?

When pundits kick around save-the-New York Times scenarios, they often bring up the notion of a white knight: A Daddy Warbucks in the form of Bill Gates, Warren Buffett, or, um, Google (GOOG), who would ride in to save the paper.

So this is kind of like that: Mexican billionaire Carlos Slim may invest “hundreds of millions” in the paper via what amounts to a high-interest loan. Slim, a telecom magnate whom Forbes pegged as the second richest man in the world last year, is looking at buying a slug of preferred stock in the New York Times (NYT), The Wall Street Journal reports.

If the deal goes through, it will give the Times some breathing room to deal with its cash crunch–it has $46 million in cash and more than $1 billion in debt, with a $400 million revolver that winds down in May. But it won’t solve its core problem– print ad dollars are disappearing and it hasn’t figured out how to replace them on the Web.

The breathing room will be expensive, too. But the paper doesn’t have many options at this point. WSJ:

For the Sulzberger family, which controls the Times through super-voting shares, the advantage of such a move would be that it would give the company capital without forcing them to relinquish control or dilute other shareholders. The downside is that the cost of such capital is generally very high.

When Goldman Sachs Group Inc needed $5 billion in September, for example, it found a willing investor in Warren Buffett but only after agreeing to pay a 10% dividend on perpetual preferred shares. Yet with credit tight, especially for companies like the Times that have poor credit ratings, many lenders have few options but to accept onerous terms.

Mr. Slim, who is said to be worth $60 billion, already had a 6.4% stake as of the end of September. The value of the investment has dropped by more than half…since then and is now worth about $60 million. At the time of the investment, a spokesman for Mr. Slim said the 68-year-old billionaire simply saw an opportunity for a piece of a ‘great’ company at an ‘attractive’ price and had no plans to take a role in its management or board.”

The Times declined to comment on the report to me, but Reuters has followed up with a story of its own confirming the basics of the WSJ account.

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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google