DBRS Confirms News America & Entities at BBBp

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of News America Inc., News America Holdings, and News Corporation Finance Trust II (collectively, “News Corp.” or the “Company”) at BBBp. All trends are Stable.

In fiscal 2005, News Corp. achieved solid revenue growth in each of its seven main segments, thus more than doubling EBITDA to US$4.2 billion, up from fiscal 2002 levels. As a result, News Corp.’s credit profile could improve over the near term, should it maintain its current operating and financial trends.

DBRS notes that the Company’s strong financial results were driven by a highly diversified, premier portfolio of global media assets. Specifically, this included its cable/television networks and filmed entertainment. In an industry where the success of video content is generally unpredictable, News Corp. has demonstrated a keen ability to consistently produce/distribute content that draws sizeable audiences. This has enhanced its pricing power with advertisers and distributors. Moreover, DBRS notes that another of News Corp.’s valuable assets is the Company’s considerable interests in the world’s leading direct-to-home providers, whose combined market values easily exceed News Corp.’s total debt. Also from these assets, the Company realizes synergy gains and adds value in this chain through vertical integration.

DBRS believes the Company is poised to capitalize on: (1) new technologies that broaden News Corp.’s potential distribution channels (e.g. iPods and wireless handsets); and (2) ongoing investment in online/digital businesses with high-growth advertising and the ability to leverage News Corp.’s existing content. This should offset results of slower-growth traditional media assets. In addition, News Corp.’s strong balance sheet and excellent liquidity provide considerable flexibility and facilitate expansion of its online presence through acquisitions. DBRS expects that the Company will be disciplined about acquisitions and not sacrifice its balance sheet to make deals, after restoring it from weak levels in prior years.

In a very dynamic industry, DBRS views the Company’s entrepreneurial culture as an asset, providing creativity and versatility. However, a potential rating improvement could be undermined by: (1) diminished growth prospects of integral cable and television channels through lower ratings, or (2) lower motion picture sales.

Note:
p – This rating is based on public information.