The newspaper industry's hard knocks reverberate even in such bastions as Times Square.

While it's not reduced to engineering a reverse stock split to keep its stock listed, New York Times Co. has had to seek creative ways to maintain liquidity. The latest, a $250 million sale of notes to two entities related to Carlos Slim, gives the publisher breathing room through 2009, but hardly at bargain prices. Grupo Financiero Inbursa SAB de CV's Banco Inbursa and Inmobiliaria Carso SA de CV are each buying $125 million of notes with interest of just over 14%, although the company can pay 3% of the interest in additional securities.

"Solving a near-term liquid problem with high-priced debt is typically not the best solution for improving your long-term credit profile," says Mike Simonton of Fitch Ratings Inc., who calls the package from Slim "definitely a pricey form of financing."

Granted, it is difficult to establish a baseline for what is expensive and what is cheap, given the dearth of comparable media transactions. "This is going to place a significant interest burden on the company's cash flow generating ability," Simonton says. "We thought they would be challenged to generate free cash flow in 2009 anyway."

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The vote of confidence from Slim should be encouraging, however. Few would doubt the savvy of the Mexican telecom tycoon, based upon the fortune he has built. As part of the deal, Slim gets warrants that, if exercised, would push his stake in the Times to 16% to 17%.

However, it's not the best sign that your industry has caught his attention. He has shown a penchant for investing in distressed companies such as MCI Communications Corp., Global Crossing Ltd. and Altria Group Inc., the former Phillip Morris Co., which was besieged by tobacco litigation.

The Times has its own problems. Standard & Poor's estimates that the publisher's Ebitda, after expenses related to buyouts, dropped 30% last year, and it expects another 30% drop in 2009. The agency did not lower the Times' ratings because of the Slim financing package.

All newspaper publishers that have watched traditional advertising dollars turn to digital pennies now face the wrenching prospect of waiting for this currency to evolve into digital dollars. Wachovia Capital Markets LLC expects a 32% drop in the Times' December advertising linage from luxury retailer Saks Inc., which is laying off 1,100 employees and happens to be one of Slim's other plays. That's good news, compared with forecast declines of more than 50% by Bergdorf Goodman and Neiman Marcus Group Inc.

As we enter 2009, the problems of 2008 seem quaint. A year ago, the Times faced a proxy fight from activist investors Harbinger Capital Partners Funds and Firebrand Partners LLC. The firms worried that the publisher was not confronting industry changes with sufficient aggressiveness. The Times agreed to add two dissident directors to its board.

Wachovia analyst John Janedis suggests in a January report that the transaction with Slim, while expensive, may represent a pre-emptive move to secure financing before costs go higher. Meanwhile, the publisher is busily pursuing sales of its stake in the Boston Red Sox major league baseball team and a sale-leaseback of the new and architecturally striking New York Times Building to gain more flexibility.

"NYT has managed through the turmoil in the credit markets better than many of its peers, in our view, selling its TV station group near the peak and not acquiring any sizable assets over the past couple of years," he writes.

If nothing else, the deal with Slim gives management time to focus on deeper industry problems. Given the recent history of newspapers, however, it's tough to be optimistic about possible solutions.