Moody's lowers rating on NYT Company

By Thomas Lifson

AP reports that Moody's Investors Services lowered it ratings outlook on the New York Times Company from "stable" to "negative." However, the service affirmed ratings for the company's commercial paper and senior unsecured debt at their current levels, which are at the low end of investment grade after earlier cuts.

The negative rating outlook is a result of the increased pressure on the company's retail and classified advertising from industry competition and the downturn in the housing market, Moody's said.

"These pressures along with the 31 percent increase in the company's quarterly dividend in March 2007, tax payments on recent asset sales and continued heavy capital spending through early 2008 will challenge the company's ability to generate sufficient free cash flow" required to reduce debt-to-earnings ratio in 2008 to the level previously anticipated, Moody's said.

The ratings affirmation reflects the company's faster-than-anticipated debt reduction from the sale of its broadcast television stations, a radio station and 50 percent interest in the Discovery Times channel.

Maintaining the increased dividend obviously will be a challenge for the company given the unfavorable business outlook cited by Moody's. Sulzberger/Ochs family members who control the company thanks to a two-class system of shareholding may not care about the stock price, but they no doubt do care about their dividend checks. The television station group was the crown jewel among its readily salable assets. The company's investment in its new headquarters building is probably salable at a healthy profit, but the massive billion dollar plus investment in the Boston Globe and other New England newspapers has lost a substantial portion of its value as those properties founder. Jettisoning its recent internet acquisitions would be an embarrassing reversal, and leave the company stuck in the dying newspaper business, a shadow of its former multi-media diversified self.