What is it with billionaires and newspaper publishers?
Carlos Slim, the Mexican telecommunications tycoon, is consideringincreasing his investment in the New York Times Co. (NYSE:NYT) byseveral hundred million dollars, according to The Wall Street Journal.One scenario being discussed be for the NYT to issue Slim preferredstock which carries no voting right but pays a dividend. HarbingerCapital, which waged a successful proxy battle against the company lastyear, may be another source of capital for the beleaguered newspaperpublisher.
The emotional appeal of owning America’s most prestigious newspaper isblinding these investors to fiscal reality. Sure, the Times needs cash– lots of it. As of the end of September, it had about $46 million incash and $1.1 billion in debt "It has a $400 million credit facilitythatexpires in May, $250 million in notes due in 2010 and another $400million credit facility due in 2011," the Journal notes.
But business continues to be lousy. Ad plunged atdouble-digit rates at the end of last year and there is no reason to think that won’t continue this year. Times CEO Janet Robinson has already said this year will be one of the most challenging the company has ever faced. It has already reduced its dividend and probably will cut it it further. Additional layoffs would not be surprising as it tries to mortgage its corporate headquarters. Still, there are some rich people eager to invest.
They are so blinded by the prestige of owning a daily that the businessacumen that made them wealthy escapes them. Sam Zell bought TribuneCo. figuring his knowledge of the real estate business would somehowtranslate to the media. Now, the publisher of Los Angeles Times andChicago Tribune is in bankruptcy. There is no reason to think Slim and Harbinger will fare much better.
The problems of newspaper publishers can not be solved with just money.