• by Erik Sass  @eriksass1, July 7, 2009

Two of the nation's leading newspaper publishers are seeing delays in their plans to sell assets to raise much-needed cash. These postponements will turn up the financial heat on The New York Times Co., which is trying to sell The Boston Globe, and McClatchy Co., which was supposed to sell a real estate parcel belonging to the Miami Herald to a developer. 

NYTCO said that Goldman Sachs, the bank in charge of The Boston Globe auction, was extending the deadline for bids on the paper, which may be packaged together with the Worcester Telegram & Gazette if buyers are interested, originally due by the middle of this week.

However, Goldman did not set a new deadline for bids to be received. This is an ominous sign, suggesting that the auction has generated little interest among potential buyers -- even after NYTCO management extracted concessions worth $20 million a year from unions in an effort to make the paper more marketable.

That's not particularly surprising, considering the well-publicized woes of The Boston Globe, which has consistently suffered disproportionately large declines in revenue and profitability relative to the rest of the company.

In the first quarter of 2009, for example, total NYTCO revenues fell 18.6% compared to the same period in 2008, to $609 million -- but total revenues at the New England Media Group fell 20.6% to $104 million in the same comparison.

Likewise, in the first quarter, NYTCO's flagship media group saw ad revenues fall 27.3% to $201 million, compared to a 31.6% decline at the New England group (to $55.7 million).

In case potential buyers needed any more disincentives, the global credit crunch has made it much more difficult to line up financing for big mergers and acquisitions -- especially for risky or troubled properties like large metro daily newspapers.

Also this week, the McClatchy Co. said that the developer who agreed to buy real estate near the Miami Herald offices is delaying the deal by six months. The developer, Citisquare Group, is exercising an option in its contract with McClatchy for the planned purchase of 10 acres of land -- most covered by parking lots -- which allows it to delay the deal from June 30 to December 31 of this year.

This is the second delay imposed by Citisquare, which previously pushed the purchase date back from Dec. 31, 2008, to the end of June.

With each delay, Citisquare is required to compensate McClatchy by increasing the "termination fee" -- the charge the developer will incur if it cancels the acquisition altogether. However, McClatchy -- like most other big newspaper publishers in the U.S. -- needs cash now. Earlier this month, Standard & Poor's Ratings Services predicted that McClatchy will default on at least part of its debt by the end of 2009 or in early 2010.

S&P downgraded the company's credit rating after McClatchy revealed that it had reached agreements with creditors to exchange $103 million of old notes representing a variety of debts for new notes, at a discount of 70%. The deal would also give creditors cash for some of the retired debt.

Essentially, the offer targeted creditors that were worried about the risk of default on the old notes, leveraging this concern to reduce the company's overall debt burden. But the debt exchange fell short of its original goal: McClatchy was prepared to exchange old notes representing as much as $1.15 billion of its old debt.

S&P explained: "The downgrade of the corporate credit rating to 'SD' [selective default] reflects our view that the exchange at a significant discount to the par value of the notes is tantamount to a default given the distressed financial condition of the company."