Mexican Billionaire Carlos Slim, chairman of Grupo Carso and Telefonos de Mexico SAB. Photographer: Jin Lee/Bloomberg
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Oct. 29 (Bloomberg) -- Mexican billionaire Carlos Slim discusses the $250 million loan he made to The New York Times and the outlook for the media company. Slim, ranked the world?s richest man by Forbes magazine, controls Telefonos de Mexico SAB, the nation?s largest landline phone company. He was attending the George Washington University Global Forum in New York. Slim speaks with Betty Liu on Bloomberg Television?s ?Bottom Line With Mark Crumpton.? (Source: Bloomberg)
New York Times Co. sold $225 million of six-year bonds to refinance debt as the publisher of the namesake newspaper seeks to repay a loan from Mexican billionaire Carlos Slim three years ahead of schedule.
The senior-note offering, boosted from $200 million, is part of a ?refinancing strategy,? the New York-based company said today in a statement distributed by Business Wire. The 6.625 percent notes yield 501 basis points more than similar- maturity Treasuries, according to data compiled by Bloomberg.
Times Co. issued debt for the first time since borrowing $250 million from companies controlled by Slim in January 2009. As part of the financing, the billionaire?s Banco Inbursa SA and Inmobiliaria Carso SA received six-year notes with a coupon of 14 percent and detachable warrants, Times Co. said in a regulatory filing. Chief Financial Officer James Follo said in an Oct. 19 earnings call that ?given the terms,? the company plans to repay or refinance the debt ?at the earliest feasible date? after they can be called on Jan. 15, 2012.
?The Slim notes were issued while the credit markets had collapsed and revenue trends at the Times were under significant pressure,? said Mike Simonton, a debt analyst with Fitch Ratings in Chicago. ?The terms of the Slim notes are generally disadvantageous to the company, and with the credit markets opening up, there is an opportunity for the company to lower its interest costs and further improve its liquidity position.?
Junk-Bond Yields
The average yield on speculative-grade debt fell to 7.62 percent on Oct. 29, the lowest since May 2007, according to Bank of America Merrill Lynch?s U.S. High Yield Master II index. Times Co.?s outstanding notes due in March 2015 have a coupon of 5 percent, and its debt maturing in September 2012 has a 4.61 percent coupon.
Slim hadn?t yet been notified that the company may repay the $250 million loan early, he said in an Oct. 29 interview with Bloomberg Television?s Betty Liu on ?Bottom Line With Mark Crumpton.?
?What is important is that they are improving and they can have a better financial capacity,? Slim said.
The new notes are graded B1 by Moody?s Investors Service and are ranked B+ by Standard & Poor?s, the rating companies said in separate statements. They are non-callable, Bloomberg data show. Barclays Plc managed the sale, according to a person familiar with the transaction, who declined to be identified citing lack of authorization to speak publicly on the offering.
Moody?s Outlook
Moody?s raised its outlook on Times Co. to ?positive? from ?stable,? citing the repayment of the notes from Slim.
?The company has publicly indicated its intent to retire the notes to reduce interest expense,? analysts John Puchalla and Alexandra Parker wrote in a note today. ?Gross balance sheet debt and cash interest expense will increase in the near term as a result of the proposed 2016 note offering, but should drop below current levels once the Slim notes are called.?
Abbe Serphos, a Times Co. spokeswoman, declined to comment on the offering beyond the statement and regulatory filing.
Times Co. has $774 million of debt and capital lease obligations outstanding as of Sept. 26, the company said today in a regulatory filing.
?The conditions in the high-yield market are attractive for issuers right now,? Simonton said. ?There?s no certainty whether the market will remain open when the company needs the financing.?
Trimming Costs
Chief Executive Officer Janet Robinson is trimming costs as advertising and circulation revenue slumps. The company, faced with competition from News Corp.?s Wall Street Journal, has posted a sales decline in 10 of the past 11 quarters.
Times Co. said in its third-quarter earnings statement distributed by Business Wire on Oct. 19 that it is making progress in plans to begin charging readers for New York Times? content online. It will allow people to read some stories without charge if they come to the website from social networks or search engines, the company said.
The financing from Slim included warrants to purchase 15.9 million shares of the company?s Class A shares at a price of $6.3572 per share, according to the January 2009 regulatory filing.
Inmobiliaria Carso has a 6.93 percent stake in the company, according to a regulatory filing dated Feb. 20, 2009.
New York Times rose 2 cents to $7.69 at 4:02 p.m. in New York Stock Exchange composite trading.
The cost to protect debt issued by Times Co. rose 8 basis points to 244.3 basis points, according to data provider CMA.
Credit-default swaps, which typically rise as investor confidence deteriorates and fall as it improves, pay the buyer face value if a company defaults in exchange for the underlying securities or the cash equivalent.
To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
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