Fitch Affirms News Corp.'s Ratings; Outlook Stable

  Fitch Affirms News Corp.'s Ratings; Outlook Stable

Business Wire

NEW YORK -- June 28, 2013

Fitch Ratings has affirmed the 'BBB+' Issuer Default Rating (IDR) assigned to
News Corporation (News Corp.) and its wholly owned subsidiary News America,
Inc. Fitch has also affirmed the specific issue ratings assigned to News
America, Inc. A full list of ratings follows at the end of this release. The
Rating Outlook is Stable. Approximately $16.5 billion of debt outstanding as
of March 31, 2013 is affected by Fitch's action.

KEY RATING DRIVERS

--The ratings incorporate the modest increase in leverage pro forma for the
separation transaction (described below);

--Fitch does not expect any material changes to the company's financial or
capital allocation policies following completion of the separation
transaction;

--News Corp's portfolio of cable networks and leading brands underpin the
ratings.

In Fitch's view, following completion of the separation transaction (News
Corp. will be renamed Twenty-First Century Fox, Inc. (FOX)), FOX will own
businesses consisting of a strong portfolio of cable networks, leading
television and movie studios, national television network, and local
television broadcast assets and an international direct satellite broadcast
business, each of which have the scale characteristics necessary to operate at
high margins. Fitch believes these businesses position the company with solid
growth prospects and the ability to generate meaningful levels of free cash
flow (FCF).

The separation transaction will strengthen FOX's operating profile modestly,
in Fitch's opinion, as the publishing businesses included in the separation
are faced with more secular challenges and operate with lower margins and
higher capital intensity.

Fitch does not expect any material changes to the company's financial
strategies or capital allocation policies. News Corp. remains committed to its
share repurchase program; however, the pace of share repurchases has
diminished during fiscal 2013. Shareholder returns (dividends and stock
repurchases) that exceed FCF generation are incorporated into current ratings,
to the extent that leverage remains below Fitch's 3x total leverage threshold.
The company had $3.6 billion remaining on its $10 billion authorization as of
March 31, 2013. Shareholder returns totaled approximately $2.2 billion during
the first nine months of fiscal 2013, representing approximately 104% of FCF
before dividends.

Given the strength of FOX's underlying businesses, strong liquidity position,
and Fitch's FCF expectations, Fitch believes that sufficient capacity exists
at the current rating level to accommodate a slight increase in leverage
resulting from the separation transaction and to fund the $2.6 billion initial
cash capitalization of new News Corp. All of the debt currently outstanding at
News Corp. will remain with FOX following the separation transaction. Fitch
expects FOX's leverage, pro forma for the separation transaction, to increase
to 2.6x (versus 2.3x actual) as of the LTM period ended March 31, 2013 -
solidly within Fitch's 3x target for the 'BBB+' rating.

Fitch believes FOX is poised to reduce leverage from the pro forma level
post-spin and anticipates leverage trending between 2.4 and 2.2x by the end of
fiscal 2014. The company generated approximately $2.3 billion of FCF during
the LTM period ended March 31, 2013. Going forward Fitch anticipates FOX will
generate annual FCF ranging between $2.5 billion and $3 billion during the
rating horizon.

Fitch believes that FOX's liquidity position and financial flexibility will
remain strong for the rating following the separation transaction while
acknowledging the transaction will lower cash balance and modestly diminish
FCF generation. Pro forma for the separation transaction FOX's cash balance
was approximately $6.8 billion as of March 31, 2013. FOX's liquidity position
is strong and supported by the borrowing capacity from its $2 billion revolver
(expires May 2017) and expected FCF generation. Scheduled maturities are
well-laddered and manageable considering FCF, reliable market access and
back-up liquidity. The company has no maturities scheduled during the
remainder of 2013. Upcoming maturities total $152 million during fiscal 2014
(June 2014) or $902 million during calendar year 2014.

The terms of the separation transaction call for FOX to indemnify the new News
Corp. for certain payments related to civil claims and investigations made
after the completion of the transaction in connection with the alleged phone
hacking, illegal data access and inappropriate payments to public officials
related to U.K. newspaper matters. The indemnification also reaches to legal
and professional fees paid in connection with criminal matters provided the
fees and costs are related to employees that are directors, officers, or
certain designated employees of News Corp. Important to note is that FOX will
not provide any indemnification for any criminal fines or penalties arising
from violations of law. While the indemnification agreement does not limit or
quantify the potential liability, Fitch expects FOX will have sufficient
liquidity to accommodate its indemnification requirements within the current
ratings.

The separation of News Corp.'s publishing and media and entertainment
businesses into two separate public companies (the separation transaction) is
expected to close on June 28, 2013. Following completion, News Corp. will be
renamed Twenty-First Century Fox, Inc. (FOX). FOX will retain News Corp.'s
media and entertainment businesses including its cable networks, television
and movie studios, national television network, and local television broadcast
assets and international direct satellite broadcast business. News Corp.'s
investments in British Sky Broadcasting plc (BSkyB), Yankees Entertainment and
Sports Network, and Hulu among others will remain with FOX. The publishing
business created through the transaction will hold News Corp.'s newspapers,
information services and integrated marketing services businesses, digital
real estate services business, book publishing business, digital education
business, and the sports programming and pay-tv businesses located in
Australia.

RATING SENSITIVITIES

Positive rating action would likely coincide with FOX adopting a more
conservative financial policy highlighted with a gross leverage target of 2x
or lower. Meanwhile, FOX will need to demonstrate that its operating profile
can sustain itself amidst ongoing competitive pressures, changing media
consumption patterns and evolving technology platforms.

Negative rating actions are more likely to coincide with a material shift in
financial policy including, but not limited to, the company adopting a more
aggressive financial strategy or event-driven merger and acquisition activity
that drive leverage beyond 3x in the absence of a creditable de-leveraging
plan while exhausting excess cash balances. A negative rating action based
solely on operational performance is unlikely over the short term.

Fitch affirms the following ratings:

News Corp.

--IDR at 'BBB+'.

News America, Inc.

--IDR at 'BBB+';

--Senior unsecured at 'BBB+'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012)

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=795043

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Contact:

Fitch Ratings
Primary Analyst
David Peterson, +1 312-368-3177
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Rolando Larrondo, +1 212-908-9189
Director
or
Committee Chairperson
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Managing Director
or
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brian.bertsch@fitchratings.com
 
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