Barclays Upgrades New York Times Co. On Manageable Debt

By: Jennifer Saba

Barclays Capital upgraded The New York Times Co. to “overweight” after the company released quarterly results on Wednesday.

Barclays analysts Hale Holden and Danish Agboatwala raised estimates on the Times Co. because they believe the company’s balance sheet has significant less risk. “With no near-term credit triggers, potential positive event risk” — the New England Sports Venture sale — “and limited maturities for five years, the company has built in adequate flexibility to maneuver,” wrote analysts in a note.

While Barclays is still bearish on the newspaper industry, analysts think the Times is better positioned to outperform the sector in advertising revenue. Barclays estimates that in 2010, advertising revenue for the industry will decline 6%. The company should beat the industry due to a higher reliance on national advertising offset by gains made in circulation and digital revenue.

Barclays based its estimate partly because analysts feel the company is stabilizing its leverage. The Times Co. has less than $600 million in outstanding senior unsecured notes, of which Carlos Slim holds $250 million; $75 million in notes mature in 2010 something Barclays views as “manageable.”

The Times Co. could also realize greater sale proceeds from the Red Sox sale as the market could improve within the next year or so. Additionally the company’s improvement in the under-funded status of its pension plan falling from $535 million to $420 million is viewed as a positive.

At a more broad level, Holden and Agboatwala mentioned the company’s plans to role out a metered model in 2011 for its flagship Web site. At first, the analysts were confused by the long lead-time but have come around after executives said on a call yesterday that they want to build out the systems so that the experience is frictionless for consumers. However, one area the company could be more aggressive, analysts wrote, is with its online and mobile pricing.

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