Moody’s Downgrades New York Times Co. To Notch Above Junk

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By: E&P Staff

Moody’s Investors Services downgraded The New York Times Co.’s senior unsecured debt to Baa3, the lowest investment-grade level, from Baa1 on Monday, saying it believes the publisher’s free cash flow leverage will remain “significantly weaker” in 2008 than expected.

Moody’s said the Times debt position will be weaker because of an “ongoing deterioration in newspaper advertising revenue” combined with the cash it will need to fund capital spending initiatives, and $132 million in annual dividend payouts.

The ratings firm assigned a “stable outlook” to the Times Co., saying it expects “greater revenue stability in 2009 as digital media generates more revenue and cyclical economic pressure eases.

Moody’s said the Times Co. is managing its balance sheet conservatively.

“Moody’s believes revenue will decline and credit metrics will weaken in 2008,” but the note from Senior Analyst John E. Puchalla said Times Co.’s debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) will improve to the low 3-times range from approximately 3.4-times now.

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