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The  New York Times is in big trouble. The dead tree industry is dying, and the financial crisis has accelerated the process. Henry Blodget has been reporting on this at Silicon Alley Insider, and the numbers are pretty scary.

With that said, the Times will survive. Its brand is worth more than the outstanding debt, and it still has some valuable tangible assets as well. One of these is a 17.5% stake in New England Sports Ventures, which owns the Red Sox, Fenway Park, Fenway Sports Group, and 80% of the New England Sports Network.

How much is that stake worth? At the time of the purchase, John Henry, Tom Werner, and the NYT Co. paid $700 million for the team, the ballpark, and the share of the network. The Red Sox accounted for $380 million of that total. Six years later, Forbes has the Red Sox valued at $816 million, which might be a bit light considering the $1 billion+ offers for the Cubs.

So taking that valuation at face value, and assuming no appreciation in any of the other assets (which is ridiculous, of course, since Fenway Sports Group didn’t even exist in 2002), the Times’ share would be worth $198.8 million, a 62% gain. Taking into account FSG, which is expected to have revenues of about $220 million this year, adds tens or even hundreds of millions of dollars to that figure.

This is all very important, since the Times has a $400 million debt payment due in May, and only $46 million in cash (and seriously negative short term cash flows). Something will have to give. As Blodget writes, their options include: major cost cuts (including a suspension of dividends), asset sales, or sale of equity.

Only an asset sale would be likely be capable of bringing in $400 million on its own. But it’s an open question as to whether the Boston Globe or any of the Times’ other regional papers could fetch nearly enough. And the Times probably won’t want to split with its internet properties, such as About.com, which are performing far better than the company’s print business.

So maybe the answer is NESV. The Times noted that this investment was largely a strategic play that would help the Globe. If the company is planning on selling the Globe in the near future (which would seem like a logical move, if it is even possible), they might be willing to take their profits from the Red Sox and move on.

The only trouble here is that it needs to done quickly, which is notoriously difficult to do in baseball, and won’t be any easier with cash hard to come by in the current markets. It’s possible that Henry and Werner could be interested in increasing their own stakes if they were given a good deal, but that may be wishful thinking. Bringing on a new partner would take many months, and the Times has only a very short window.

The likely end result will be a combination of Blodget’s three options: some cost cutting (including a cut, but not a suspension, of the dividend), a sale of some equity at a firesale price, and possibly an asset sale. If that asset turns out to be NESV, look for a line of bidders trying to take advantage of a distressed seller.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

2 Existing Comments

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  1. on November 9th at 05:15 pm
    Tips said:

    CC should have taken out the ad in the NYT…


  2. on November 10th at 02:44 pm
    El Guapo's Ghost said:

    A transaction involving a limited partner may move more quickly than when a controlling stake of the team is for sale.

    I think MLBAM wants to gather a stable of advertisers for the MLB Network before focusing on changing any part of MLB.TV’s successful business model. At that time, they would have better data on potential advertisers for MLB.TV and make a more informed decision.

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