Business

Moody's May Cut New York Times to Junk, Stock Dives

Things are looking grim at the Times today. The newspaper announced low Q3 earnings and the possibility that the newspaper may default on its debt today, and Moody’s says that they may downgrade The New York Times’ stock to junk status. That sounds a bit like parents telling a teenage son he may get grounded, […]

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Things are looking grim at the Times today. The newspaper announced low Q3 earnings and the possibility that the newspaper may default on its debt today, and Moody's says that they may downgrade The New York Times' stock to junk status.

That sounds a bit like parents telling a teenage son he may get grounded, but it certainly isn't good for stock values (The Times' stock is down almost eight percent today on the news).

Increased earnings online this quarter weren't enough to offset losses in other areas for the newspaper, which posted a 51.4 percent decline in profit. Even worse, because of the stalled economy, selling off assets will be difficult. The company will be forced to conserve cash to avoid defaulting on its debt.

Moody says that while The Times' performance was within the lower range of where Moody's had expected, the company's refinancing risk prompted Moody's to review the company's ratings.

From Reuters:

Newspaper advertising market conditions are likely to remain challenging in 2009 and continuing revenue declines will make it difficult for the company to bring its credit metrics in line with its investment grade rating, Moody's said in a statement.

It will also make it hard for the publisher to execute its plans to improve liquidity, Moody's added.

Moody's said it may cut the New York Times from "Baa3," the lowest investment grade. Downgrades into junk territory can significantly increase a company's borrowing costs.

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