DBRS Revises Trend on News Corporation to Stable from Positive

DBRS has today revised the trend on its BBB ratings of News Corporation’s (News Corp. or the Company) finance subsidiaries to Stable from Positive.

Despite improvement in News Corp.’s diverse global media operations in recent years, DBRS believes that this improvement has not precluded News Corp from being immune to cyclical factors as evidenced by the current global economic downturn. As such, DBRS believes that it is difficult at this time to posit an improvement in News Corp.’s ratings given pressure on the global economy that has hit certain News Corp. segments head on. These factors, in addition to its position in businesses that continue to experience some structural changes (i.e., newspapers, broadcast television and magazines and inserts), along with foreign exchange impacts, led News Corp. to recently change its outlook for F2009 from positive operating income growth of 4% to 6% (off a base of $5.0 billion for F2008) to pressure on operating income in the low- to mid-teens.

Despite this, DBRS believes that News Corp. will continue to remain a solid BBB-rated company with global diversity in the media sector that will continue to drive good levels of free cash flow and healthy credit metrics. While some of its businesses are experiencing cyclical pressure as noted above, DBRS does note that News Corp. continues to drive an increasing portion of its total EBITDA from operations that tend to be less cyclical and that are growth areas within the media sector. These include: (a) cable television – which is largely subscription based and aided by the success of Fox News; (b) filmed entertainment; (c) direct broadcast satellite which is subscriber driven; and (d) online and Internet operations from businesses such as MySpace.

DBRS notes that News Corp. had ample liquidity at September 30, 2008, with $7.75 billion in total liquidity (including $5.5 billion of cash on hand) and should generate at least $1.5 billion of free cash flow in F2009. Additionally, its credit metrics remain sound with gross debt-to-EBITDA expected to remain below 2.5 times and cash flow-to-debt of 0.25 times or more in F2009.

As a result, DBRS believe News Corp. is one of the few media companies that are in an enviable position with ample liquidity and sound credit metrics. This, along with its very manageable maturity schedule over the next couple of years, will allow News Corp. to withstand the structural and cyclical pressures that are currently impacting some of its operating segments.

Notes:
All figures are in U.S. dollars unless otherwise noted.
This rating is based on public information.

The applicable methodology is Rating Printing and Publishing which can be found on our website under Methodologies.

This is a Corporate rating.