Sept. 11 (Bloomberg) -- News Corp., owner of Fox television, Discovery Communications Inc. and other media companies raised almost $4 billion in debt sales last month, a sign that thawing credit may open the door for takeovers.

The surge in issuance compares with nothing in July and zero a year earlier. It brings total bond sales by U.S. media companies to $18.3 billion in 2009, more than all of 2008, and lets companies repay maturing debt or finance growth.

The access to markets, combined with cash and pressure for growth, may fuel acquisitions, said Hale Holden, a debt analyst who follows media companies with Barclays Capital in New York. Walt Disney Co.’s pending $4 billion purchase of Marvel Entertainment Inc. gives the world’s largest media company new characters, such as Spider-Man and Iron Man, to revive shrinking sales at parks and in films, TV shows and consumer products.

“It’ll start slowly,” said Aryeh Bourkoff, co-head of global media and communications banking at UBS AG in New York. “There’s still a level of discipline coming so recently out of a very difficult cycle that will undoubtedly limit the frenzy.”

Average borrowing costs for U.S. media companies have fallen to 4.96 percent as of yesterday, from a record 9.4 percent on Oct. 20, 2008, according to Merrill Lynch & Co.’s U.S. Corporates, Media index.

The average yield relative to benchmark rates on the debt has plunged to 212 basis points as of yesterday, from a 2009 high of 586 basis points on Jan. 2, Merrill data show. A basis point is 0.01 percentage point.

More Borrowing

Disney, which had $3.13 billion in cash as of June 27, will finance the buyout, now valued at $51.13 a share, with cash and stock, and plans to repurchase the new shares in the next year, a move that will likely boost future borrowing, Moody’s Investors Service said.

“For the right deals, this market is much better than it was,” Tom Staggs, Disney’s chief financial officer, said in an Aug. 31 interview. The company followed up on its Marvel purchase with the Sept. 8 acquisition of Wideload Games Inc., a video-game developer.

The biggest media companies have used the recession to build their cash troves. The top 20 had almost $32 billion as of their latest regulatory filings, according to Bloomberg data.

News Corp., where revenue fell 11 percent last quarter, almost doubled its cash to $6.54 billion from December 2007. Warner Bros. parent Time Warner Inc., based in New York, more than quadrupled its kitty to $7.01 billion after spinning off cable systems, and has said it will consider acquisitions if potential returns top other cash uses. Keith Cocozza, a spokesman, declined to comment.

Comcast’s Cash

Philadelphia-based Comcast Corp., the biggest U.S. cable television service, is sitting on $4 billion. On Aug. 28, a U.S. Appeals Court threw out government-imposed market-share limits. John Demming, a company spokesman, declined to comment. The company’s 5 percent revenue growth last quarter was the smallest in more than three years.

Chief Operating Officer Stephen Burke said this week at a Bank of America Corp. conference that the company is looking to add to holdings that include E! Entertainment Television, the Golf Channel and Style Network at a “good price.”

The most attractive assets are cable networks, video-game creators, international media concerns and production companies such as film studios, UBS’s Bourkoff said in an interview.

The Travel Channel, put up for sale by Atlanta-based Cox Communications Inc., is attracting bidders including News Corp., Cincinnati-based Scripps Networks Interactive Inc. and NBC Universal, General Electric Co.’s New York-based entertainment unit, according to people with knowledge of the situation. Holden said in June the channel may fetch up to $700 million.

Smaller Deals

News Corp. is also in talks to buy 20 percent of Saudi Prince Alwaleed bin Talal’s Rotana Media, the Wall Street Journal reported Sept. 1. News Corp. would rather be “building than buying,” Chief Operating Officer Chase Carey said this week at the Bank of America conference, echoing Chairman and Chief Executive Officer Rupert Murdoch, who said last month he isn’t seeking acquisitions “of a major nature at this moment.”

News Corp. rose 7 cents to $11.75 at 4 p.m. New York time in Nasdaq Stock Market trading. Scripps Networks gained 79 cents to $35.52 and GE fell 13 cents to $14.67 on the New York Stock Exchange.

Time Warner declined 21 cents to $29.30, while Comcast was 6 cents higher at $17.21.

Ingrid Chung, a Goldman Sachs Group Inc. analyst in New York, wrote on Aug. 31 that Glendale, California-based DreamWorks Animation SKG Inc., maker of the “Shrek” movies, may be an “attractive” acquisition target. Rich Sullivan, a spokesman for the studio, declined to comment.

Not all the money will be for takeovers. Many media companies, stung by shrinking sales of DVDs and the loss of customers and advertising to the Internet, sold bonds to refinance maturing debt.

Refinancing Debt

Viacom Inc., owner of Paramount Pictures and MTV, tapped credit markets for the first time in almost two years last month, issuing $850 million of 5- and 10-year bonds to fund a tender offer for $1.31 billion of 2011 notes.

The New York-based company, controlled by Chairman Sumner Redstone, is paying a 5.625 percent coupon on 10-year debt, compared with 6.125 percent on 10-year bonds sold October 2007, according to Bloomberg data. Kelly McAndrew, a spokeswoman, had no comment. Viacom Class B fell 48 cents to $26.03.

Discovery Communications, the Silver Spring, Maryland-based owner of Discovery Channel and Animal Planet, sold $500 million in 10-year notes yielding 5.625 percent to repay $428 million of a term loan and for general purposes. Michelle Russo, a spokeswoman, declined to comment. The shares declined 8 cents to $28.34 on the Nasdaq.

Assets for Sale

Some companies may have to sell assets, said Jay Sherwood, the head of media and entertainment banking at McGladrey Capital Markets LLC in Costa Mesa, California. His clients have included Aaron Spelling Productions, which made “The Love Boat,” and Hal Roach Studios, producer of “Laurel & Hardy.”

“In the media and entertainment sector, everybody has taken this last downturn in the economy to do a serious strategic review,” Sherwood said in an interview.

News Corp. issued bonds twice this year, raising $1 billion in February and $1 billion in August. The 6.9 percent coupon on $600 million of 30-year bonds sold last month marked an improvement from the 7.85 percent on February’s 30-year issue. Both were for general corporate purposes, the company said.

“It’s prudent to have a strong, liquid balance sheet in this uncertain environment,” Jack Horner, a company spokesman, said in an e-mailed statement. “And for companies with good credit like News Corp., it’s a smart time to issue debt.”

Disney, the world’s largest media company, rose 6 cents to $28.42. The company is paying a 29 percent premium for New York- based Marvel, based on prices before the Aug. 31 announcement.

To contact the reporters on this story: Sarah Rabil in New York at srabil@bloomberg.net; Gabrielle Coppola in New York at gcoppola@bloomberg.net.

Last Updated: September 11, 2009 16:13 EDT