Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,262.56 89.32 0.55%
S&P 500 1,842.98 12.37 0.68%
NASDAQ 4,034.16 11.47 0.29%
Ticker Volume Price Price Delta
STOXX 50 3,120.19 28.67 0.93%
FTSE 100 6,562.71 21.10 0.32%
DAX 9,244.78 71.07 0.77%
Ticker Volume Price Price Delta
NIKKEI 14,417.68 420.87 3.01%
TOPIX 1,166.55 30.46 2.68%
HANG SENG 22,696.01 24.75 0.11%

Fitch Rates Twenty-First Century Fox's Bond Offering 'BBB+'



  Fitch Rates Twenty-First Century Fox's Bond Offering 'BBB+'

Business Wire

CHICAGO -- September 25, 2013

Fitch Ratings has assigned a 'BBB+' rating to the benchmark sized 10-year and
30-year senior unsecured note offering by News America Incorporated (NAI), a
subsidiary of Twenty-First Century Fox, Inc. (FOXA) The Rating Outlook is
Stable. FOXA had approximately $16.5 billion of debt outstanding as of June
30, 2013, consisting primarily of senior unsecured notes issued at NAI. (some
are issued under that entity's former name, News America Holdings, Inc.). A
complete list of ratings is provided at the end of this release.

Proceeds of the new issue are expected to be used for general corporate
purposes. The new notes will rank pari passu with other senior unsecured
indebtedness of NAI, and will also benefit from a guarantee by FOXA. The notes
will contain an obligation to repurchase the notes at 101% upon change of
control (including a transfer of more than 50% of the company's voting stock
to a person other than News Corp. or a member of the Murdoch family) and
non-investment grade ratings, as defined. Similar to existing bonds, there are
no financial covenants.

KEY RATING DRIVERS

--FOXA's portfolio of cable networks and leading brands underpin the ratings.
Fitch believes these businesses position the company with solid growth
prospects and the ability to generate meaningful levels of free cash flow
(FCF).

--The issuance is in line with Fitch's expectations. 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.

--FOXA's liquidity position and financial flexibility remain strong for the
rating. Fitch anticipates FOXA will generate annual FCF ranging between $2.5
billion and $3 billion during the rating horizon.

--FOXA is well positioned to address the secular threats and opportunities
presented by emerging alternative distribution platforms and continued
audience fragmentation across the media and entertainment landscape.

FOXA's businesses consist 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 FCF, and
balanced against the risks inherent within the company's operating profile,
place the company solidly within Fitch's parameters for the 'BBB+' rating.

FOXA's financial strategies remain consistent, particularly its leverage
target ranging between 2.5x and 3.0x, and the company's $4 billion share
repurchase program highlight its capital allocation policy. The company
expects to complete the current share repurchase authorization by the end of
fiscal 2014. The ratings incorporate Fitch's expectation that the company's
share repurchase and M&A activity will likely exceed FCF generation, however
the ratings reflect Fitch's expectation that FOXA's leverage will remain at or
below Fitch's 3x total leverage threshold.

FOXA's capital structure and credit protection metrics remain stable and
within Fitch's expectations for the current rating. Consolidated leverage as
of the latest 12 months (LTM) period ended June 30, 2013 was 2.5x, and pro
forma for the current transaction leverage will increase to 2.7x (assuming $1
billion of issuance). Fitch expects leverage will range between the company's
2.5x to 3.0x leverage target.

Fitch believes that FOXA's liquidity position and financial flexibility are
strong for the rating given the strength of its businesses and expected FCF
generation. The company generated approximately $1.8 billion of FCF during its
fiscal year ended June 30, 2013. Additionally, the company's liquidity
position is supported by existing cash balance totaling $6.7 billion as of
June 30, 2013 ($1.4 billion held by foreign subsidiaries) and the borrowing
capacity from its $2 billion revolver which expires May 2017. Scheduled
maturities are well-laddered and manageable considering FCF, reliable market
access and back-up liquidity. Upcoming maturities total $137 million (A150
million of its 8.625% senior notes due February 2014) during fiscal 2014 and
$750 million due during fiscal 2015.

FOXA is well positioned to address the secular threats and opportunities
presented by emerging alternative distribution platforms and continued
audience fragmentation across the media and entertainment landscape. The
alternative distribution platforms generate incremental demand for high
high-quality content across all major end-markets (broadcast, cable networks
and subscription video on demand) and that large, well-capitalized content
providers, such as FOXA, will remain crucial to the industry. The ratings
incorporate expected earnings volatility generated by the company's Filmed
Entertainment segment, given the general hit-driven nature of the movie
industry.

RATING SENSITIVITIES

Positive: Positive rating action would likely coincide with FOXA adopting a
more conservative financial policy highlighted with a gross leverage target of
2x or lower. Meanwhile, FOXA 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 Trigger: 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 rates News Corp. as follows:

Twenty-First Century Fox, Inc.

--Issuer Default Rating (IDR) 'BBB+'.

News America, Inc.

--IDR 'BBB+';

--Senior unsecured 'BBB+'.

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

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=803204

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
David Peterson
Senior Director
+1-312-368-3177
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Rolando Larrondo
Director
+1-212-908-9189
or
Committee Chairperson
Mike Simonton
Managing Director
+1-312-368-3138
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement