Stephen’s Posterous

The Financial Times reported that David Geffen, the former record executive who made an offer for the Los Angeles Times two years ago, is seeking to buy the New York Times. Mr. Geffen made an offer in the past two months for just under a 20 percent stake in the company held by Harbinger Capital Partners.

Mr. Geffens offer was rebuffed because Harbinger was seeking a premium in the price of stock. Harbinger is run by investor Philip Falcone who won two seats on the New York Times’ 15-member board last year as the fund amassed a 20 percent stake.

Mr. Geffen co-founded DreamWorks SKG with Steven Spielberg and Jeffrey Katzenberg in 1994. He started Asylum Records and Geffen Records earlier in his career.

The Financial Times article said that the Ochs-Sulzberger family, which controls the New York Times through a class of shares with super-voting rights, was forced to borrow $250 million from Carlos Slim, the Mexican telecommunications billionaire, on terms that could allow him to raise his stake beyond the current 6.9 per cent to become one of its biggest shareholders.

There is no clear path to control through the Harbinger stake, given the family’s grip on voting rights.

New York Times shares are down 61 percent since the beginning of 2008. Mr. Geffen is no longer interested in buying the Los Angeles Times.

New York Times stock has been trading between a rage of $6.71 and $6.95 on May 12, 2009. The 52-week trading range is between $3.44-20.05. In the last five years, the stock has lost 84.92 percent of its value.

Source.

Slumping sales have been dogging Saks (ticker: SKS) for some time now, but at least one buyer still has his wallet open: Mexican billionaire Carlos Slim Helu raised his stake in the luxury retailer yet again, for the first time since November 2008.

On Jan. 23 Slim purchased 300,000 Saks shares for $700,695, an average of $2.43 each. He now owns 2.55 million shares, a 17.7% stake in the New York-based company. Slim, who turned 69 on Wednesday, began racking up his stake in Saks over the summer. He reached the 10% ownership mark in July, paying over $9 per share. Slim has a long history with Saks, and in the early part of the decade had built up a stake over 15%, before selling much of the stock.

Slim, a Mexican telecom mogul, often shares the winners' circle of the world's richest with Bill Gates and Warren Buffett. A few days before his Saks buy, he shelled out $250 million for a vote-of-confidence loan to the New York Times (NYT). Although Slim has continued to buy, other investors have shied away from Saks in the past year. Over the last 12 months the stock has plummeted nearly 85%, more than double the 40.4% drop seen by the Dow Jones U.S. Apparel Retailers Index.

Previously, luxury retailers like Saks were seen as a safe haven. However, once the recession deepened and even wealthy consumers began pulling back, the stock suffered. Slim's purchase came the same day that the stock dipped to a 52-week intraday low of $2.25. A year ago, the stock was trading at a high of $19. On Thursday the stock closed down 14 cents to $2.59.

Saks is one of the many companies cutting jobs in an effort to stay afloat. On Jan. 15 it announced it was laying off 1,100 employees, or 9% of its workforce. Lon Juricic, president of StreetInsider.com, notes that investors considering following Slim into the stock should be cautious, as liquidity concerns continue to plague the company.

"Apparently he believes they can work through this downturn," he says. "It's going to be a battle that could last probably at least another year until the stimulus takes effect and we really see how the consumer is going to react, if they are going to get any more confidence and start shopping again, and if the credit markets are going to open up." Juricic notes that Saks is much like Slim's other investment, the New York Times.

"They are great brands that have had great successes in the past, but they are just extremely volatile right now and are teetering on the edge," he says. "[Interestingly], Slim sees opportunity in both these companies while people here in the U.S. don't. So it's an outside foreign investor that has confidence in these brands, while others don't."

Source.

It turns out that one commodity still commands a hefty price: time.

For the New York Times, which has $500 million in credit facilities and debt due this year and a further $250 million next, the sound of the ticking clock is sufficiently disturbing to have compelled to pay Mexican billionaire Carlos Slim more than 14% on $250 million of senior notes. The company will also grant warrants enabling the investor to increase his stake in the group from 6.9% to about 17%.

The terms, including an option to add 300 basis points, 3%, of the coupon to the debt rather than pay cash, reflect the Times’ financial straits. The environment for raising funds, either through a sale and leaseback of part of its headquarters or disposal of its Boston interests, could hardly be worse. The advertising slump, meanwhile, is hurting even its flagship brand. With part of a $400 million 2011 revolving credit facility unexpended, Mr. Slim’s funds will see the company through 2009, and help refinance a portion of the notes coming due next year.

Bank financing, in contrast, would probably have come with a coupon in the high teens and without the payment-in-kind feature. In that sense, the Times has a good deal. Mr. Slim will not get a board seat or the votes to challenge the controlling Sulzberger family. But he now has greater upside should the Times pull off its asset sales and moves higher up the capital structure, above the family, with about a fifth to a quarter of its debt, in a worst-case scenario.

Mr. Slim has also strengthened his position should he later opt for a more aggressive stance. The Times must shed assets and cut costs, while also grappling with non-cyclical pressures affecting print advertising and regional media. The Times’ Mexican lender will squeeze far harder should it return a second time. Source.

The cash infusion from Carlos Slim will resolve the New York Times Co.'s immediate financial pressures, but without more aggressive cost-cutting and asset sales, it may be for naught.

While much attention has been paid to the Times's near-term debt maturities, the company's cost base is arguably as much of a problem. In the first nine months of 2008, for instance, while revenue fell 6.5% to $2.18 billion, the combination of production and selling, general and administrative costs dropped only 1.9% to $1.99 billion. As a result, the Times's earnings before interest, taxes, depreciation and amortization fell 38% in the period. Based on the revenue numbers for October and November, fourth-quarter Ebitda could decline nearly as much.

Several cost-cutting steps taken last year could alleviate that drop, although the full benefit will be more apparent in 2009 results. Even so, as ad revenue is likely to continue falling this year, the company likely will need to cut expenses even more drastically.

It won't help that Mr. Slim's investment will increase the company's interest costs. He is putting up $250 million for notes that carry a 14.05% coupon, which implies the Times' annual interest expense will rise to $74 million from around $50 million.

By helping the Times pay off this year's debt maturities, the Slim investment would give the company valuable breathing room. But with $249 million in debt due next year and more in 2011, the company can't afford to relax. Extensive asset sales are likely to be necessary. Given the tough market for selling media businesses, the publisher needs all the time it can get. Source.

The New York Times Company is in discussions with Mexican billionaire Carlos Slim about investing in the newspaper publisher to help ease its financial problems, according to people familiar with the matter.

The talks are ongoing and may yet fall apart but one of the options being discussed is a preferred-stock issue. Under this scenario, the Times Co. would issue Mr. Slim preferred stock, which carries no voting right but pays an annual dividend, in return for his investment. The investment would be similar to a loan. Preferred shares are often convertible into common stock after a defined period.

It's not clear how much Mr. Slim would be willing to invest but the people familiar the matter said it would likely be several hundred million dollars. Times Co. is said to be planning a special board meeting next week. A spokeswoman from New York Times Co. declined to comment. A spokesman for Mr. Slim also declined to comment.

It's still possible that another investor could emerge to provide the Times Co. with a capital. One possibility is Harbinger Capital Partners, a hedge fund. Harbinger holds about 28.5 million Class A shares, or about a 20% stake, in the Times Co. Last year the fund waged a proxy battle in which it sought four seats on Times Co.'s board and strategic changes at the company including the sale of non-core assets like the Boston Globe. In March, Times Co. granted the group two board seats. But a deterioration both in the value of its Times Co. and other investments may make it unlikely that Harbinger would be willing to commit even more capital to the ailing newspaper company.

An infusion from Mr. Slim would at least buy the Times Co. more time as the deteriorating newspaper ad market challenges the company's ability to service its debt.

The Times Co. has about $46 million in cash and $1.1 billion in debt as of the end of September. It has a $400 million credit facility that expires in May, $250 million in notes due in 2010 and another $400 million credit facility due in 2011. Times executives in December said the company is negotiating with lenders on long-term debt and does not plan to replace the facility expiring in May because it won't need to borrow as much. They also said they are looking to raise up to $225 million from a sale-leaseback of its share of its headquarters building and considering other financing options including revolvers, public offerings or private placements.

For the Sulzberger family, which controls the Times through super-voting shares, the advantage of such a move would be that it would give the company capital without forcing them to relinquish control or dilute other shareholders. The downside is that the cost of such capital is generally very high.

When Goldman Sachs needed $5 billion in September, for example, it found a willing investor in Warren Buffett but only after agreeing to pay a 10% dividend on perpetual preferred shares. Yet with credit tight, especially for companies like the Times that have poor credit ratings, many lenders have few options but to accept onerous terms.

Mr. Slim, who is said to be worth $60 billion, already had a 6.4% stake as of the end of September. The value of the investment has dropped by more than half since Mr. Slim since then and is now worth about $60 million. At the time of the investment, a spokesman for Mr. Slim said the 68-year-old billionaire simply saw an opportunity for a piece of a "great" company at an "attractive" price and had no plans to take a role in its management or board.

Mr. Slim is the owner of Telmex, Mexico's former telephone monopoly, and America Movil SA, Latin America's largest cell phone firm by subscribers. His telephone companies have driven most rivals out of business by charging them high fees to complete their calls through Telmex's existing network and tying up any legal challenges in Mexico's courts. The billionaire's approach to investing in the U.S. has been to look for undervalued stocks and buy as an investment.

Like all newspaper publishers, the Times Co. has had to slash costs to compensate for steep revenue declines as readers and advertisers have departed print for the Web. Last year the company cut jobs at its flagship paper, merged sections of the Times and Boston Globe to reduce printing costs and consolidated New York area printing plants.

But the global economic crisis has pushed advertising to unforeseen depths, forcing publishers to take even more drastic moves. In November the Times Co. cut its quarterly dividend by three-quarters, ending a tradition of enriching shareholders even as the stock fell. The dividend is a weighty issue for the Times because it has long been a chief source of income for many members of the Ochs-Sulzberger family, which controls the company through its majority ownership of a special class of super-voting shares. The dividend cut reduced family members' annual payout to less than $7 million from about $25 million.

While the family said it supported the cut and has no intention of selling the paper, the dwindling return could test its members' commitment to the paper as economic pressures squeeze profits. In the third quarter the Times Co. posted net income of $6.5 million, down 51% from the same period a year earlier. Ad revenue declines are accelerating. In November, ad revenue fell 21% from a year ago, after a 16.2% drop in October and a 13% decline in September. Times Co. Chief Executive Janet Robinson said in December she expects 2009 will be "among the most challenging years we have faced."

The Times Co. has taken steps to sell properties it previously said were off limits in an effort to fortify its core assets. The Times Co. since November has been pursuing potential buyers of its 17.5% stake in New England Sports Ventures, which owns the Boston Red Sox, the fabled Fenway Park and most of the network that airs the team's games, according to people familiar with the discussions. One option under discussion is to package the NESV stake with the Globe, which the Times Co. has written down by $980 million after purchasing the paper for $1.1 billion in 1993. Source.

In the week of November 17, Mexican telecommunications mogul Carlos Slim Helu bought $150 million in Citigroup shares through Inbursa, Mexico's 6th largest bank that Mr. Slim owns. Due to the $20 billion US government rescue plan, Citigroup shares have had a recovery of about 60% from the prior week's levels. On November 26, 2008, Citigroup closed at $7.05. The stock's 52-week low is $3.05 and the 52-week high is $35.29.

Analysts state that Mr. Slim’s purchase of Citigroup shares fits with his reputation as a value buyer. He has been particularly active in recent months. In September 2008, Mr. Slim became the 3rd-largest shareholder in the New York Times after reporting a 6.4 per cent stake valued at $127 million. Mr Slim, who made his ­fortune from telecommunications including Telmex, Mexico’'s fixed-line carrier, and América Móvil, the pan-American cellular phone company, has been buying other media stock, too. Source.

Mexican telecommunications mogul Carlos Slim Helu recently bought $23.1 million in Saks shares as the New York luxury retailer's stock traded near its low for the year. Through his family-owned Inmobiliaria Carso, Mr. Slim reported buying more than 7.5 million Saks shares from November 18 through November 21, 2008, bringing his family's stake in the company to 25 million shares or 17.6%. The shares were purchased at average prices ranging from $2.87 to $3.57 each. The 52-week high is $22.19 and the 52-week low is $2.67.

The purchases make Mr. Slim the largest holder of Saks, which operates the luxury stores Saks Fifth Avenue. Saks Chairman and CEO Stephen Sadove also bought 25,000 shares on November 20, 2008, for an average price of $3.22. He owns 769,132 shares. In response to Mr. Slim's purchase on November 26, 2008, Saks announced a poison pill defense against possible hostile suitors like Mr.Slim, the Mexican billionaire.

Saks operates 53 Saks Fifth Avenue stores and 49 Off 5th outlet stores and has been a frequent object of takeover or buy-out speculation. Saks stock closed at $4.33 on November 26, 2008, up 8.25% for the day. From FT and WSJ.