News Corp. looks for higher debt rating
CEO Murdoch told investors at the company's annual meeting yesterday in Australia that he expects to achieve an investment-grade debt rating "certainly within six months."
A higher debt rating would allow the company to raise money more cheaply, at lower interest rates, than its average borrowing costs of 9.1% last year.
Yesterday, Murdoch painted a bright outlook for News Corp., for the fiscal year ending June 30, 1993, despite what he described as a "very bearish" global economic environment. "We are really working on the assumption of zero growth in all the economies in which we're operating," he said.
But despite Murdoch's personal sweep through the U.S. over the past few weeks to persuade investors to buy more stock and debt in the Fox parent, analysts from Standard & Poor's and Moody's Investors Service, the top ratings watchdogs, have yet to be convinced that News Corp.'s balance sheet deserves top grades.
Moody's last Friday upgraded some long-term ratings of the company's subsidiaries by two notches on about $ 2.4 billion worth of debt. Senior unsecured debt of several subsids was upgraded to Ba-2 from B-1, and subordinated debt to B-1 from B-3. It also upped preferred stock to B-1 from B-3 .
But these improvements still fall short of investment grade.
S&P, the other top rating agency, has placed News Corp. on its CreditWatch list, which eyes companies that may see a change in their ratings.
S&P assigns an array of B ratings to senior and subordinated debt at subsidiaries of News Corp., including Fox Broadcasting and 20th Century Fox Film Corp. Ratings are expected to increase after the company completes its proposed $ 1.6 billion offering it plans to sell in global stock and bond markets soon.
S&P said it expects the new debt issues will be rated BB+. But that improvement is still one long notch away from BBB, the investment-grade tag. If News Corp. raises new cash successfully, then S&P plans to raise its BB-- rating on $ 445 million of News Corp. outstanding senior debt to BB, and all subordinated debt ratings will be raised to BB-- from B.
News Corp.'s debt was downgraded after the company embarked on a debt-funded worldwide expansion that culminated in a financial crisis in late 1990. Since then, the company has issued more shares, sold assets to reduce debt and replaced some bank loans with longer-maturing bonds.
