The New York Times Company has suspended its dividend entirely, three months after cutting the pay-out by almost three-quarters to preserve cash at the indebted newspaper publisher.

Arthur Sulzberger Jr, chairman of the group and a member of the controlling family that depends heavily on the dividend for its income, described the move as “a difficult but prudent measure in this operating environment”.

The suspension had not been widely expected, as the NYT had been seen to buy itself breathing space in January by borrowing $250m at a 14 per cent interest rate from Carlos Slim, the Mexican billionaire.

The company said then it would use the proceeds to get it through a May deadline to refinance a $400m credit facility that had concerned investors. Debt worries have cut the group’s share value by more than half since the start of 2009.

News of the dividend cut came on Thursday as the New York Times settled a $27m defamation suit brought in December by Vicki Iseman, a Washington lobbyist mentioned in a NYT story about John McCain, the former presidential candidate. The newspaper agreed to publish a statement that it had not intended to suggest an improper relationship between Ms Iseman and Senator McCain.

Mr Sulzberger said the dividend suspension – coupled with cuts to costs and capital spending plans and a review of its assets – would decrease debt and improve liquidity.

He provided no new details on the group’s financial position, but the dividend, which was cut in November from 23 cents to 6 cents a share, was expected to cost about $35m this year.

The NYT board had been criticised for increasing the dividend by 31 per cent in 2007 and for spending heavily on share buy-backs and a $600m headquarters building rather than preserving cash.

It is now seeking to raise cash through an auction of its stake in a venture that owns the Boston Red Sox baseball team.

It also announced plans in December to raise $225m in a sale and leaseback of its Manhattan headquarters but has not given details about progress in its negotiations.

The Ochs-Sulzberger Trust, which oversees the family’s 19 per cent financial interest, expressed its support, saying the suspension was in the best interests of all shareholders and affirming its commitment to the editorial integrity and independence of its flagship title.

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