Newspaper Bonds

Instead of putting their money in a shoe, cautious people often buy bonds. There is a feeling of safety in a crisp bond; it is backed up by buildings, lands, machinery, steel, coal--things. People can go and see or touch the things that make their bonds secure. But what about newspaper bonds? Only a fraction of their security is based on buildings and presses; the rest is good-will (of readers and advertisers). Indeed, a cautious investor might be alarmed if he asked himself the question: "How do I know definitely that anyone is going to buy this newspaper tomorrow or that anyone is going to advertise in it?" Habit and a good name are the only answers that a newspaper can give the investor. These answers evidently inspire confidence, for reputable newspaper bonds are being sold with almost as low a rate of interest as high-grade industrial bonds. Scarcely a week passes without the appearance of some journalistic bond issue (TIME, Feb. 27).

Last week the three newspapers of Lancaster, Pa.--Intelligencer,* News-Journal, New Era--were brought under a single ownership, the Lancaster Newspapers, Inc. This corporation, forthwith, put on sale at par a 6% bond issue to the amount of $600,006, pointed out that in 1927 the three newspapers earned $121,978 or 3.38 times the annual interest requirement of the new bond issue. A ratio of 3.38 between earnings and interest charges would once have been thought barely adequate to induce people to loan money to a manufacturing concern which had great brick & mortar assets. That such a ratio was deemed sufficient to get money for newspapers indicated that bankers now rate the pen as no less mighty than the brick.

*Its direct predecessor was founded in 1794.