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Thursday, March 19, 2009

Mexican Billionaire Bails Out New York Times

Mexican Billionaire Bails Out New York Times
By Christa Thomas

In an attempt to bolster the flailing company’s finances, Mexican billionaire Carlos Slim has agreed to invest $250 million USD in the New York Times Company.

With a circulation of around a million, the New York Times is the third biggest selling newspaper in the United States. However, Times Co's stock has recently fallen nearly 50 percent and its debt is rated as "junk" by Standard & Poor's.

Mr. Slim, one of the world’s richest men, is the owner of Telmex, Mexico's major telephone provider, and America Movil, Latin America's leading mobile phone operator. He already owns a 6.9 percent stake in Times Co. Under the recent agreement, financial institutions controlled by Mr. Slim will loan Times Co the money in return for senior unsecured notes with detachable warrants convertible into common stock. The warrants can be converted into 15.9 million common shares, or approximately 11 percent of Times Co's common equity, which would make him the second largest shareholder.

The transaction with Mr. Slim follows several months of Times Co selling and merging assets in an attempt to solve the company's liquidity problems. Times Co is facing a liquidity problem due to substantial debts coming due in the midst of the international economic crisis. The fact that the company is offering Mr. Slim such generous terms highlights both the extent of its crisis as well its dwindling options.

The influx of capital may not give Times Co enough breathing space given the current economic climate, a steep decline in newspaper advertising, and a reduction in revenues as readers switch from print publications to the web. Within the last month, both Tribune Company, which owns the Chicago Tribune and Los Angeles Times, and the Minneapolis Star Tribune Company filed for bankruptcy protection. It remains to be seen whether the loan from Mr. Slim will allow the New York Times to survive as an independent company.

Sources: Associated Press, Reuters, Forbes

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