Shares of New York Times Co. are down 4%, but the newspaper giant’s credit outlook is more worrisome to investors. After the company reported lousy results after Wednesday’s close, Standard & Poor’s said it is facing a potential downgrade, which would drop the credit rating into junk territory.

Credit-default swaps of NYT widened out to record levels on that news. The company earned 15 cents a share for the most recent quarter, short of the 22-cent consensus, and will continue to face headwinds from the poor advertising market and competition from other media. The CDS lately reflected a cost of $400,000 annually for insurance against $10 million of bonds for the next five years.

“We can not envision a single positive scenario,” writes Barclays Capital credit analyst Hale Holden, who notes that one of the company’s credit facilities matures in 2009. While Barclays does not anticipate NYT having trouble extending the maturity, the potential for a downgrade raises the possibility of more onorous terms imposed by its lenders.

New York Times did not say whether it would cut its dividend, and while it said it expects to lower its cost base by more than $130 million in 2008, it also raised its forecast for buyout costs. “This suggests that it is more concerned with placating shareholders than maintaining its tenuous hold its investment grade rating,” write analysts at derivatives research firm Markit Group in London.