Extra, Extra: New York Times (NYT) About To Get Downgraded To "Junk"

Standard & Poor's has put the New York Times' (NYT) credit ratings on "Credit Watch with negative implications," meaning that analysts at S&P are pondering downgrading the company's corporate credit rating to non-investment, or "junk" status. The move follows another horrible Q2 result in which the company missed both revenue and EPS estimates.

Specifically, S&P cites the "accelerating pace of total revenue decline and a rate of decline in EBITDA in the first half of 2008 that indicates the company may have difficulty achieving our expectations for the current rating."

See Also: NYT Q1: Slide Continues, Digital Not Helping

Full Release:

NEW YORK (Standard & Poor's) July 23, 2008--Standard & Poor's Ratings Services 
today placed its ratings for The New York Times Co., including the 'BBB-' 
corporate credit rating, on CreditWatch with negative implications.
     "The CreditWatch listing reflects an accelerating pace of total revenue 
decline and a rate of decline in EBITDA in the first half of 2008 that 
indicates the company may have difficulty achieving our expectations for the 
current rating," explained Standard & Poor's credit analyst Emile Courtney. 
"This is notwithstanding our understanding that The New York Times is 
attempting to lower its cost base by more than $130 million in 2008."
     Total revenue declined 5% in the March 2008 quarter, 6% in the June 2008 
quarter, and 10% in the month of June 2008. In the six months ended June 2008, 
EBITDA declined by 20% excluding buyout expenditures and by 36% after buyout 
expenditures. The current 'BBB-' rating incorporates the expectation that 
total revenue declines would not exceed the mid-single-digit area this year, 
and that EBITDA declines would not exceed the mid-teens percentage area 
(excluding buyout expenditures). Maintenance of the current rating also 
depends on the company growing its online revenue base in a manner that can 
begin to fully offset print revenue declines over the next two years and, 
concurrently, EBITDA generation stabilizing over this time frame. The 
likelihood of the company achieving these goals is complicated by the current 
pace of print advertising revenue declines, even though online revenue growth 
at 13% remained good in the June 2008 quarter. In addition, we are concerned 
the company will be unable to maintain leverage (as measured by total lease- 
and pension-adjusted debt to EBITDA) at 3.25x or less on average--the target 
for the current rating. Leverage was 3.5x at June 2008.
     In resolving the CreditWatch listing, we will review operating and 
financial expectations over the near-to-intermediate term.