The New York Times Company's 10Q (NYT) contains more details on the company's cash crunch.

Specifically, the company must deliver $400 million to lenders in May of 2009, six months from now. The company has only $46 million of cash on hand, and its operations will likely begin consuming this meager balance this quarter or next. The company has been shut out of the commercial paper market, but has a $366 million short-term credit line remaining that it entered into several years ago, when the industry was strong. It has not yet drawn this cash down, and given the current environment and the trends at the company, we would not take for granted that it will be able to do so.

The New York Times is in discussions with its lenders about the May payment, and management thinks it will be able to work something out ("We expect that we will be able to manage our debt and credit obligations as they mature." Note the use of the word "manage" as opposed to "meet.") The company does not provide details as to what this managed solution might look like, so here are some possibilities.

1. Sell assets. This is a must. It is also likely to be difficult and painful in the current environment. As we noted in "New York Times Running On Fumes", the New York Times has gotten itself in a situation where it will be forced to choose among multiple bad options just to pay its bills. A fire sale of the building, the Boston Globe, the Red Sox, and/or other assets is one of them.

2. Draw down the $366 million remaining on the second credit line immediately. This option, too, unfortunately, is problematic (if it weren't, the NYT would almost certainly have already drawn this money down). What is a "credit line"? It is a promise, on paper, that a bank will lend NYTCO money when it wants it. This promise was made several years ago, when the New York Times and the rest of the newspaper industry were undefeated heavyweight fighters in perfect physical shape. Now, it's the 11th round, and they're battered and bloody and slumped on the ropes.

Doesn't the bank that signed that credit line have to give NYTCO the money? Not necessarily. The bank is contractually obligated to give NYTCO the money, but some contracts, obviously, are barely worth the paper they're printed on. Given the current circumstances, if we were that bank, and we were as strapped and scared as most banks are these days, we would certainly be reading the fine print to see what sort of "material adverse change" clauses the contract might include. Even if NYTCO could persuade us that early 2009 is not going to be as bad as it seems like it will be, the money will be due in two years, in 2011, and 2011 just isn't that far away.

3. Make major cash-saving cost cuts, including eliminating (or severely cutting) the dividend. This won't conjure up $400 million by May, but it might convince a lender that NYTCO understands what it is up against and is committed to taking the tough steps necessary to deal with it. It would also allow the company to keep generating cash through 2009, which would obviously help.

Can't NYTCO just borrow more money from someone else or issue some commercial paper or something? This will be tough. The reason the company has drawn down its first short-term credit line is that it got shut out of the commercial paper market. On getting another loan from someone else...would you lend NYTCO more money right now? (There are certainly terms under which we would, but they are not terms that NYTCO would like very much.)

Conclusion

Will this cash crunch force the New York Times into bankruptcy? No. (Or at least not yet.) The company still has assets, and it is not yet burning so much cash that it can't take steps to save itself.

Those steps are likely to be unpleasant, though. And they will be taken at gunpoint.

See Also:

New York Times Running On Fumes

How The New York Times Can Save Itself

Dividend Cut Could Make New York Times Sale More Likely