By: E&P Staff Even with the $5 billion acquisition of Dow Jones & Co. to swallow, News Corp.'s size, geographic diversity, and continuing ability to generate huge free cashflows qualifies it as a continuing good credit risk, Fitch Ratings said late Tuesday.
Fitch affirmed its Issuer Default Rating (IDR) and senior unsecured debt ratings at "BBB," an investment-grade rating that is defined as "a low expectation of credit risk."
The ratings affect about $12.5 billion of debt and exchangeable securities.
Fitch said the rating outlook is stable.
"Fitch believes that News Corp.'s credit protection measures, strong free cash flow, and solid liquidity make the credit profile very strong for the rating category given its current business risks," the firm said.
It said credit concerns "center on the secular challenges facing newspaper and TV broadcasting, corporate governance, acquisition risk, and risks associated with potential changes in financial and operating philosophies which could result from leadership succession over the intermediate term."
News Corp. has been deleveraging in recent years, mostly through strong cash flow growth, Fitch said. "With over $2 billion in pro forma cash, $2.5 billion in free cashflow (after dividends), $2.1 billion in available facility capacity, and additional cushion provided by its investments (BSkyB, Gemstar) the company has significant flexibility and liquidity at current rating levels," it said.
News Corp, which has approximately $2.0 billion remaining on its share purchase authorization at Sept. 30, 2007, could "add over $6 billion in debt and still maintain a pro forma unadjusted debt-to-operating EBITDA leverage ratio under 3.5x."
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