Thursday, 23 October 2008

Dividend, debt and junk rating - just a quick look back.

NYT Co. are talking of cutting their 2008 dividend which, with decreasing revenues would be a pretty good idea, if it wants to continue to service that $1.2 billion of debt and not obtain a junk status.

The Q3 results announcement does have JR talking of conversations with lenders and 'evaluating future financing arrangements', so something is a foot, and this story from back in August reminds of us why.

New York Times shares plunge on ratings concerns
Tuesday August 12, 6:37 pm ET
NY Times shares fall after report says publisher could preserve rating by cutting dividend
NEW YORK (AP) -- New York Times Co. shares slumped Tuesday after an analyst suggested in a media report that the company may need to cut its dividend to avoid a "junk" credit rating.
The newspaper publisher's stock dropped 85 cents, or 6 percent, to $13.24 Tuesday. In the past year it has ranged from $12.08 to $22.95.
Last year, the company raised its quarterly dividend 31 percent to 23 cents, which costs it more than $100 million a year in payments to shareholders.
New York Times Co. has seen revenue contract in recent quarters, which crimps cash available for operations and payments. That led Moody's Investors Service to say it may cut the company's credit ratings if operating metrics do not approve.
Earlier Tuesday, Bloomberg quoted a credit analyst with Moody's Investors Service saying the company may need to preserve cash -- potentially by lowering the dividend -- to avoid having its credit rating slashed.
Ratings indicate a company's ability to repay debt and are used by lenders to set the terms of borrowing. Lower ratings mean more expensive credit for a company.
Two weeks ago, Moody's changed the company's rating outlook to "Negative" from "Stable" on concerns about slipping advertising sales. Moody's said the lower ratings outlook reflects worries that the Gray Lady's ad revenue could slip further.
"The New York Times' first-half 2008 operating performance is in the range Moody's anticipated, but there is increasing risk that earnings in the second half of 2008 and in 2009 could fall below prior expectations," Moody's said.
The ratings agency held its senior unsecured Prime-3 commercial paper ratings for the company steady at "Baa3," the lowest investment-grade rating.
The New York Times Co. did not immediately return calls seeking comment.

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