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S&P Puts News Corp On CreditWatch Negative; Will News Corp Buy McGraw Hill Next?

Tyler Durden's picture




 

S&P, bored with taking the axe to various insolvent European governments, just went after the man, the myth himself. Next steps: News Corp. expands it media empire by purchasing McGraw Hill (soon to be followed by a tack on acqusition of former-Buffett darling MCO)?

News Corp. Ratings Placed On CreditWatch Negative On Rising Risks Associated With Phone-Hacking And Related Allegations

Overview

  • We see increased business and reputation risks associated with broadening legal inquiries in the U.K.
  • In addition, the FBI is looking into certain allegations pertaining to the phone-hacking scandal
  • We are putting all ratings on News Corp. on CreditWatch with negative implications

Rating Action

On July 18, 2011, Standard & Poor's Rating Services placed all ratings, including its 'BBB+' corporate credit rating, on New York-based News Corp. on CreditWatch with negative implications.

Rationale

The CreditWatch action reflects, in our opinion, the increased business and reputation risks associated with broadening legal inquiries. Since our last research update on July 13, the U.K. legal process has expanded and pressure from U.S. lawmakers has increased for an FBI probe. In an interview with Bloomberg Businessweek in reference to phone-hacking allegations at "News of The World," an FBI official for the agency's New York office said, "We're aware of certain allegations pertaining to possible phone hacking by News Corp. personnel and we're looking into those charges." In our opinion this and other recent developments materially increase the reputational, management, litigation, and other risks currently faced by News Corp. and its subsidiaries. The last several days have been marked by the resignations of the chief executives of News International and Dow Jones, the issuing of summonses to key company executives to appear before Parliament on July 19, the arrest of a former senior company official, and a weakening of the company's executive bench strength.

We see the risk that, if evidence arises sufficient to bring a criminal charge against the company or any current or former employee of the company, then prosecuting authorities in the U.S. could proceed with those charges. As indicated in our July 13 research update, any criminal conviction can materially affect the reputation of the company, which may be more substantial than any financial penalties. We acknowledge the company's broad business and financial strengths--it has significant capacity to cover most scenarios of financial penalties, based on an array of precedents. More important in our analysis are the risks to the ongoing business in the event of additional criminal inquiries and in particular the criminal prosecution of key individuals, the corporation, or its subsidiaries. Business risks include loss of reputation that alienates current and potential clients; forfeit of important business opportunities (such as closure of a profitable publishing business and abandoning of the company's attempt to take full ownership of the U.K.'s largest pay TV operation); and management distraction. Financial risks that go beyond the magnitude of likely penalties include the possibility of a far more severe drop in the company's stock price that could make stock issuance less appealing, and the same scenario for debt market access. We believe a further dramatic drop in the share price could prompt management to consider additional share repurchases beyond the recently announced $5 billion share repurchase authorization.

CreditWatch

Resolution of the CreditWatch listing could take longer than the 90 day typical period of review and analysis, but could involve, in a downside scenario, an interim rating action while on CreditWatch.

 

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Mon, 07/18/2011 - 16:14 | 1467819 Careless Whisper
Careless Whisper's picture

that was a no brainer considering they are being investigated for criminal activity.

Mon, 07/18/2011 - 18:22 | 1468192 Zero Govt
Zero Govt's picture

yes another "no brainer" is after 14 years of the rape of Britian by the Marxists (Labour Party) their cooked books revealed the debt was £4 trillion not £900 billion ... S&P, Fitch and Moodys didn't budge an inch and still have AAA ratings of Britains unpayable in 100 years national debt

it's not like the ratings agents are crones of the establishment, the insolvent establishment

Mon, 07/18/2011 - 16:19 | 1467839 Dr. Engali
Dr. Engali's picture

Won't see this on Fox Business report.

Mon, 07/18/2011 - 16:21 | 1467848 KeyserSoze
KeyserSoze's picture

Glenn Beck probably has a report on this on standby, gonna tell everyone how Communists have brought down a hallowed defender of capitalism and liberty Rupert Murdoch. And he'll go on to state how it all goes to show why we need a new war.

Fucking asswipe.

Mon, 07/18/2011 - 16:24 | 1467852 Dr. Engali
Dr. Engali's picture

Glenn who?

Mon, 07/18/2011 - 16:42 | 1467899 cougar_w
cougar_w's picture

You know,  big dumb guy, used to play country music.

Had his own TV variety show. As I recall it sucketh.

Mon, 07/18/2011 - 16:20 | 1467842 Globalist Slayer
Globalist Slayer's picture

Do the ratings agencies ever downgrade each other?

Mon, 07/18/2011 - 16:46 | 1467913 cougar_w
cougar_w's picture

Yeah, what the actual fuck was that supposed to be about? Do these guys get together at holiday mixers and come up with these crazy pranks? "Wait dudes listen to this! How about we down grade each others asses? That would totally rawk."

Mon, 07/18/2011 - 17:05 | 1467982 augie
augie's picture

I dont think they call them "mixers" i think they call them "fancy dress parties." I never get invited to those sorts of things anyhow. 

Mon, 07/18/2011 - 18:27 | 1468207 Smiley
Smiley's picture

Aren't those the same charlatans that said suprime mortgage derivatives were AAA+ ?

Mon, 07/18/2011 - 19:30 | 1467850 spanish inquisition
spanish inquisition's picture

I was thinking about shareholder lawsuits against the "independent" board members for lack of oversight and the loss of a few billion. I am guessing the whistleblower "death for no particular reason" will make people think twice before going down that road.

Edit: Did manage to find something  http://www.ft.com/intl/cms/s/0/781a0694-ac94-11e0-bac9-00144feabdc0.html?ftcamp=rss#axzz1SVDTWwQC

Mon, 07/18/2011 - 16:33 | 1467878 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

... and the DOW pops up another 40 points in the after hours/futures.

Mon, 07/18/2011 - 16:56 | 1467897 1fortheroad
1fortheroad's picture

Woops, my bad

Mon, 07/18/2011 - 16:38 | 1467891 papaswamp
papaswamp's picture

Next weeks headlines...S&P execs found dead of unknown causes.

Mon, 07/18/2011 - 18:39 | 1468229 Zero Govt
Zero Govt's picture

Next weeks headline (long one this): The successive Governing Parties of Labour, Lib-Dems and Tory have all blocked the NewsCorp bid for BSkyB. In a democracy this is 'strange' that all 3 Parties should have the exact same policy but not if you look at all top 20 policies on all ranges of subjects where they are all remarkably identical (socialist) ..namely they look like an 'establishment' of a '1 Party State' just with different colour rosettes pinned on the moronic peanut brained puppets that pass lamely as public representatives in one of the most corrupt, rotten and bankrupt countries in the world 

Long headline that! I think The Sun newspaper would just say, "Commie Command Nobbles Free Press"

Meanwhile the State and EU/EC funded BBC continues their destruction of a Free Press buying up local newspapers and radio stations with taxpayers money

if people don't wake up to the corrupt rot spreading like cancer then you lot deserve a George Orwell book to identify yourself as the sleeping shoulder shrugging zombies oblivious to all about them. Wakey Wakey Sheeple

Mon, 07/18/2011 - 19:15 | 1468334 TheBadgersSett
TheBadgersSett's picture

 - not suspicious' say police.

Mon, 07/18/2011 - 16:39 | 1467892 cougar_w
cougar_w's picture

Bad S&P. No holiday basket 4 you.

Mon, 07/18/2011 - 16:44 | 1467905 virgilcaine
virgilcaine's picture

Rebekkah's wild hair do alone is worthy of a downgrade.. yikes.

http://uk.reuters.com/resources/r/?m=02&d=20110715&t=2&i=459404129&w=460...

 

Mon, 07/18/2011 - 16:47 | 1467921 cougar_w
cougar_w's picture

No no all the Valkyries wear their hair that way.

Mon, 07/18/2011 - 18:08 | 1468161 Rainman
Rainman's picture

...ukulele in hand she is Tiny Tim.

Mon, 07/18/2011 - 18:43 | 1468248 spanish inquisition
spanish inquisition's picture

Very nice. The best I could come up with is Ron Pearlman as the Beast http://en.wikipedia.org/wiki/Beauty_and_the_Beast_(TV_series)

Mon, 07/18/2011 - 16:51 | 1467932 virgilcaine
virgilcaine's picture

Rebekkah's wild hair do alone is worthy of a downgrade.. yikes.

Mon, 07/18/2011 - 18:22 | 1468193 slewie the pi-rat
slewie the pi-rat's picture

paging enry iggins:  enry iggins to the white courtesy phone.  ta.

Mon, 07/18/2011 - 17:57 | 1468135 disabledvet
disabledvet's picture

Tip of the iceberg. Media does not nearly have the power in the GB as it does here what with only one TV station over there. The numbers seem large: thousands. That's downright conservative compared to ye olde USA. We do millions here-with the body count no less since "once you have the juice it's never enough." no one ever asked "why the radio issues after 9/11?" now we know don't we. Cops and firemen...and the media? Insane.

Mon, 07/18/2011 - 18:01 | 1468137 kennard
kennard's picture

S&P is in no position to downgrade anyone for "reputation" after its corrupt granting of AAA ratings to junk real estate securities pre-2008.

Today, they are doing someone's bidding to get to Murdoch.

Mon, 07/18/2011 - 18:57 | 1468258 Zero Govt
Zero Govt's picture

another vigilant person... there seem so few amoung the dreary sheeple here at ZH that have swallowed this political-media stitch-up job and even more obviously rank, rotten and orchestrated than the farcically obvious one carried out (and botched) on Strauss-Khan 

keep swallowing whole the goon garbage without filtration ZH'ers, you're too dozy to spot the set-ups or the big picture of where this is leading... you're the same sheeple population that allowed Hitler, Mao and Stalin to eliminate by hate and spin their independent competition and then turn on you and abroad ...you have afterall got 3 wars, 5 soon, but you would have stopped Hitler when he invaded Poland right?

Dream on, sleep on, your as dumb and blind as Germanys population, Maos and Stalins  

Mon, 07/18/2011 - 19:23 | 1468361 TheBadgersSett
TheBadgersSett's picture

+1 As pleasureable as it has been to watch News International getting reamed from all sides, whatever monstrous entity is pulling the strings and what it's ultimate motives might be is a little scary to contemplate.

Mon, 07/18/2011 - 18:14 | 1468175 Astute Investor
Astute Investor's picture

Rupert Murdoch must rest easier knowing Barney Frank has his back.

http://www.zerohedge.com/article/barney-frank-goes-apeshit-over-sp-insin...

Tue, 07/19/2011 - 03:06 | 1469360 StychoKiller
StychoKiller's picture

Aww, couldn't happen to a finer bunch of media pukes!

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