Meet the New York Times’s New (Very Expensive) Bank: Carlos Slim
It’s a done deal: Billionaire Carlos Slim has given the cash-strapped New York Times (NYT) $250 million worth of breathing room. At a very high price.
Under terms of a deal announced late Monday night, the Mexican telecom magnate has lent the Times $250 million via senior unsecured notes that pay out at 14 percent annual interest. He also gets warrants on 16 million shares of Times “A” stock.
Slim already owns 6.9 percent of the company’s A shares, and the warrants will let him buy another 10 percent. But the Sulzberger family will retain control of the company via its ownership of its “B” class stock.
The Times will use the money to refinance some of its $1.1 billion in debt, including a $400 million revolver that expires in May.
But the cash won’t solve the company’s core problem: Its ads are disappearing, and it has yet to cut cost costs to reflect that reality. And now its costs just increased–it will have to pay Slim $35 million a year in interest.
Brutal. But so are the Times’s prospects.
The New York Times Company Enters into Agreement with Banco Inbursa and Inmobiliaria Carso for $250 Million in Senior Unsecured Notes
The New York Times Company today announced that it had entered into a private financing agreement with Banco Inbursa, S. A., Institucion de Banca Multiple, Grupo Financiero Inbursa (“Banco Inbursa”) and Inmobiliaria Carso for an aggregate amount of $250 million ($125 million each) in senior unsecured notes due 2015 with detachable warrants. The notes will rank equally and ratably on a senior unsecured basis with all senior unsecured obligations of The New York Times Company.
“This agreement provides us with increased financial flexibility to continue to execute on our long-term strategy,” said Janet L. Robinson, president and CEO. “The proceeds from this transaction will be used to refinance existing debt, including amounts currently borrowed under a revolving credit facility that matures in May 2009. We continue to explore other financing initiatives and are focused on reducing our total debt through the cash we generate from our businesses and the decisive steps we have taken to reduce costs, lower capital spending, decrease our dividend and rebalance our portfolio of assets.”
“We are very pleased to expand our strong relationship with The New York Times Company,” said Arturo Elias, director of Inmobiliaria Carso. “We believe that with the strength of The New York Times brand, its national and international reach, its potential for digital expansion and most of all, its world-class news and information, the Company will continue to be a leader in the media industry.”
The notes have a coupon of 14.053 percent, of which the Company may elect to pay 3 percent in kind. The notes are callable beginning three years from the issue date at 105 percent of par, with subsequent call prices declining ratably to par.
Banco Inbursa and Inmobiliaria Carso also received detachable warrants for an aggregate amount of 15.9 million Class A shares (50 percent each), at a strike price of $6.3572. The warrants expire in January 2015.
Mr. Carlos Slim Helu and members of his family are the main shareholders of Grupo Financiero Inbursa, S.A B. de C.V., which is the parent company of Banco Inbursa, and are the owners of Inmobiliaria Carso, which currently holds 6.9 percent of the Times Company’s Class A shares.