(Adds closing share price in sixth paragraph.)
July 13 (Bloomberg) -- New York Times Co., publisher of the namesake newspaper, is repaying the $250 million loan granted by billionaire Carlos Slim earlier than planned, a sign the company has stabilized after contending with flagging advertising sales.
The repayment of the two-year-old loan, which will total $279 million including unpaid interest and a prepayment premium, will take place on Aug. 15, five months in advance, according to a statement. Times Co. will record a $46 million loss in the third quarter because of the payment.
Times Co., which took the loan in 2009 as ad sales at its flagship newspaper slumped, has since expanded its digital business to help spur growth. It started a paid online subscription model this year and is preparing to introduce a similar model at the Boston Globe later in 2011.
“It has been a very good operation for us and for them,” Arturo Elias, Slim’s chief spokesman and son-in-law, said today in a telephone interview. “It was done in a difficult moment for the company, and they have done a good job and so are able to prepay.”
Time Co.’s advertising sales dropped 2.7 percent last year to $1.3 billion, slowing from a 24.5 percent decline in 2008.
The company’s stock rose 11 cents, or 1.3 percent, to $8.89 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 9.3 percent this year.
Times Co. borrowed $250 million from Slim’s Banco Inbursa SA and Inmobiliaria Carso SA in 2009, buying time to sell assets and refinance existing debt. The lenders received six-year notes with a coupon of more than 14 percent and detachable warrants. The warrants to acquire 15.9 million shares at $6.3572 apiece expire in January 2015.
Times Co. reported a total of $998.5 million in long-term borrowings at the end of March. Times Co. had said in October 2010 that it would repay the loan in January 2012, three years ahead of the original repayment date. By repaying next month, the Times said it will save $39 million in annual interest expenses.
The prepayment won’t affect the timing of Slim’s decision on when to exercise the warrants, Elias said.
“That decision will be taken in its proper moment,” he said. The billionaire chose to hold on to his warrants even when Times Co.’s share price closed at $14.67 on Jan. 11, 2010, its highest close since he obtained the warrants.
In addition to the warrants, Slim holds 10.05 million Times Co. class A shares, or a 6.9 percent stake in that class of shares. Times Co.’s controlling family owns most of the class B shares, which carry the right to elect 70 percent of the board of directors.
Slim’s publicly disclosed investments, including the Times Co. stake, are worth $72.1 billion, according to data compiled by Bloomberg. Most of his holdings are in Mexico, and his Latin American phone carrier, America Movil SAB, represents about 59 percent of that fortune. His Mexican companies also include his Inbursa financial group, a mining outfit, construction, real estate and retail.
Outside of Mexico, Slim also holds 16 percent of luxury retailer Saks Inc.’s shares and stakes of less than 1 percent in Spanish financial-services firm CaixaBank and cigarette seller Philip Morris International Inc.
Slim made money on the loan deal, netting interest payments of $35.1 million a year, a $4.5 million “investor funding fee” as part of the 2009 loan agreement, getting a premium fee for the prepayment and obtaining the warrants, which would have netted $38.5 million as of yesterday’s close.
His acquisition of shares in Times Co. has been less fruitful. Of his 10.05 million shares, 9.1 million were obtained before September 2008 at undisclosed prices. In the two years before that, shares closed no lower than $12.16, 38 percent higher than yesterday’s closing price.
“Over the past two years we have significantly strengthened the Times Company’s cash position,” Chief Executive Officer and President Janet Robinson said in the statement.
--Editors: Niamh Ring, Romaine Bostick
To contact the reporters on this story: Brett Pulley in New York at firstname.lastname@example.org; Crayton Harrison in Mexico City at email@example.com
To contact the editor responsible for this story: Peter Elstrom at firstname.lastname@example.org