The byline of the theoretical next heir of the New York Times has begun appearing in the paper. His name is Arthur Gregg Sulzberger -- A.G. to you -- and his situation is achingly existential, caught as he is between cosseted past and harsh future, his career and reason for being hanging wholly hostage to the recession's depth. And, too, his father's cleverness -- something for which his old man has never been noted.
The New York Times has a billion dollars in debt, $400 million coming due in May and an additional $300 million by March 2010. If the unprecedented drop in advertising continues, it is reasonable to presume that the Times will default on its obligations before March 2010 -- unless it can somehow come up with the cash to operate the company and to hold off creditors until a meaningful recovery begins.
Its most recent move was announced earlier this week: The Times agreed to a sale and lease-back arrangement of its new building. The terms of this deal were reported by the Times, with little analysis from other sources. The Times said that it had sold its interest in the building for $225 million, and that it will lease back the space it needs for approximately $35 a square foot. Now, that rent is about half the market rate, even in the recession. In order to get such a favorable rent the Times had to sell the building at way under market value. On top of that, the deal provides that the Times can buy back the building for little more than it sold it in 10 years. So what's in it for the buyer? Why would it be doing a deal that depends on an economically troubled company being able to pay its rent?
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