The New York Times Pays Back Its Debt: Escape from the Rescuer

It was a strange alliance: In 2009, the Mexican billionaire Carlos Slim saved The New York Times from insolvency with a loan. What motives the richest man in the world had remains unclear. Now the loan is paid off — three years earlier than expected. For that, the newspaper had to cut back on many things.

In case relief or satisfaction prevails at The New York Times, the editorial department and publisher endeavor not to show it publicly: no press release by the publisher, no report in the business section of the newspaper.

However, Monday must have been a happy day for the leading newspaper in the country: 3 ½ years before the due date, The New York Times repaid the Mexican businessman Carlos Slim his $250 million. The money rescued the indebted Times in 2009, but it was an unpopular loan that was heavily debated by editors and readers.

Initially scheduled to be repaid in 2015, the publisher announced in July that the loan would be repaid on Aug. 15 of this year; a spokesman for the publisher confirmed the payoff to the SZ [Süddeutsche Zeitung]. Publisher Arthur Sulzberger, Jr., and chief executive Janet Robinson explained the August payoff to employees with the piece of information that the business was doing better financially thanks to numerous measures in the past two years.

When the Mexican Carlos Slim, who through his telecommunication services became one of the richest men in the world, bought into The New York Times in 2008 (he bought 6.9 percent of the market listed shares for $127 million) and additionally granted it a loan for over $250 million, a sense of doom prevailed in New York.

Even the Corporate Jet Was Sold

There were all kinds of rumors, which ranged from a hostile takeover by finance jugglers on Wall Street to an impending sale to bankruptcy. To settle debts and finance the yearly budget of the editorial department amounting to roughly $200 million in spite of a lack of advertising, the Times had to lay off hundreds of workers, freeze a scholarship program, raise the sales price, sell the corporate jet, sell the new building and rent it back — and slash dividend payments to the owners, the Sulzberger family. There was even talk of imminent insolvency at the time. The New York Post, the tabloid newspaper of competitor Rupert Murdoch, was pleased by the threat to the country’s most powerful publishing dynasty, whose time had run out: “Run out of Times” read the headline in the New York Post.

The Motive for the Loan Remained Unexplained

Slim’s loan brought rescue, but at the same time caused new fears and doomsday scenarios — because if the Times could not pay him back, Slim would receive up to 10 percent more of the company’s shares. Slim’s motive for the loan puzzled industry observers. He spoke of a pure business interest that would bring profit. But how could one believe him? He lost millions with his investment because the stock price dropped. Did the Mexican want to drive the Sulzbergers out of their debt-ridden publishing house and eventually take over the Times? A horrible thought for the editors who already saw themselves having to take orders from Slim. Did he want to gain political influence in the United States?

The Mexican journalist Andres Martinez, who periodically wrote for the Times, warned that Slim’s investment would influence editorial decisions. As if wishing to refute this impression, the Times ran a critical piece about the “thin-skinned” and “reticent media baron” who controlled a monopoly in Mexico and avoids difficult questions.

The article alleged that Slim threatened newspapers in his country that published critical reports about him with advertising boycotts. The Miami Herald describes Slim as a “predatory capitalist” who owes his millions to his influence and relationship with politicians.

Naturally there were alternatives to Slim’s millions. It was speculated that the profitable media company Bloomberg could take over the Times. But the financial service provider still belongs to its founder Michael Bloomberg, who at the same time is also the mayor of New York. Michael Bloomberg as owner and publisher? That would have plunged the Times into difficulties, because how could they then still report halfway critically about the mayor? The very rich music businessman David Geffen also expressed interest back then. He made an offer to Arthur Sulzberger, Jr., publisher of the Times, to buy all stocks in the media business, privatize the publishing company and bring out the paper together with Sulzberger. Geffen offered to manage the publishing company; Sulzberger was supposed to take care of editorial concerns. After successful restructuring, the newspaper was supposed to pass over to a non-profit foundation.

The Best Publisher in 100 Years

This scenario, reported in 2009 in the magazine the New Yorker, apparently scared Sulzberger. The family would have lost control of the newspaper forever and with it, its power in the city and the whole country. Sulzberger turned Geffen down. To him, Slim must have appeared to be the lesser evil.

Under Arthur Sulzberger, who has been at its head since 1997, the Times has won 39 Pulitzer prizes. However, from time to time this achievement is forgotten. In 2005, Gay Talese, a former Times reporter, who wrote the first of his brilliant books about the newspaper (the classic “The Kingdom and the Power”) said about Arthur Sulzberger, Jr., “You get a bad king every once in a while.” The comment hit the publisher hard at that time; from then on, he refused to speak to journalists.

In June, Talese said he was mistaken back then, and he regrets his comment. Sulzberger had led the newspaper though the darkest times of journalism. “Young Sulzberger has gone through hell.” He could go down in the history of the Times as the greatest publisher since his great grandfather Adolph Ochs, who bought the newspaper in 1896. Where Talese had seen Arthur Sulzberger as a certain failure five years ago, he now concedes that he has been a fighter. That the newpaper is better today than ever before is thanks to him. It was more than amends. Sulzberger could not have wished for greater praise.

Slim Made a $29 Million Profit

Editor-in-chief Bill Keller, who is departing in September, said in 2009 that one will perhaps only have one to two years to find a new business model for financing journalism on the Internet. The successful Pay Street was apparently one such measure. The New York Times is doing better in the meantime, even if the publisher will presumably have to report a loss in the third quarter due to the pay-off. Slim continues to be the second-highest stockholder, but owns only non-voting stock. His share remains at roughly 7 percent. Had the Times not been able to pay back the loan, his share would have risen to 17 percent and with it, the possibility of influence.

The loan ran until Jan. 15, 2015. The early payback saves the Times $39 million a year in interest. Slim can’t complain, making what for him was a small deal. With interest he now receives $279 million.

In New York, relief now presumably prevails. The acceptable terms of the pay-off were found in a report about the upcoming payback in July. The Times, wrote a reporter at the time, with the pay back to Slim, would be freeing itself from one of its larger financial obligations. The Times is “freeing itself.” More than that: It has freed itself from its unloved rescuer.