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Fast Track

Wild Ride as Debt Markets Slide

Media companies shake off interest-rate woes as they seek bond placements

As the credit crunch crimps plans for media companies, only the strongest are finding they can tap the debt markets to fund their operations.

The recent wild swings in the financial markets underscore shaky investor confidence, which has also affected the market for corporate debt, where companies typically go for loans from investors to fund their operations or for an acquisition.

Selling pressure in recent weeks has caused interest rates for corporate debt to increase, making it less palatable for a potential borrower to raise money. Lately the market has settled, but investors are only interested in lending money to companies with solid balance sheets and strong cash flow.

In the media sector, cable giant Comcast Corp., which earned $1.4 billion on $15 billion in revenue in the first half of the year, proved to be fittest among the big cable companies. Not only was the company able to sell $3 billion in bonds last week, it had investors knocking at its door to do so. The transaction received $6 billion in orders from investors, but there weren't enough bonds to go around. That's a good sign for the market in general and good news for other large cable or media companies that may need to access the debt market. Often when one company sees overwhelming demand for a peer, it will seize the opportunity.

“The advantage of having an investment grade credit rating is that you can access the market through any credit cycle,” says Mike Simonton, senior director of media and entertainment at Fitch Ratings Service. “Companies are returning and funding at levels that are pretty attractive.”

However, it is still difficult to raise debt for other media companies with questionable financial outlooks or deals tied to leveraged buyouts (LBOs), which tend to inflate company debt to levels that make investors nervous in times of economic uncertainty.

The market for these so-called “high yield” or “junk” deals has significantly weakened, leaving many companies out in the cold.

Both Tribune Co. and Cablevision Systems, the fifth largest cable operator in the country, have LBO-related financing needs.

Concerns regarding the Tribune deal stem from the heavy debt load of $8.4 billion the company will take on as a result of the takeover by financier Sam Zell, and the company's ability to pay back that debt.

The company has been challenged by soft advertising environments in its core businesses. Tribune's revenue was down 5.6% in the first half of the year, led by a 7.5% slide in its publishing division

The company needs $4.2 billion to fund the purchase of the remainder of Tribune shares to complete the buyout. Banks have committed to providing the loans for the money, but the financing costs are likely to be higher than the company anticipated as a result of the poor market conditions.

Higher borrowing costs may also force father-and-son team Charles and James Dolan to rethink how they will structure the financing needed to take Cablevision private. The company left open the door for change in a recent SEC filing stating that continued deterioration in the credit markets may increase interest costs beyond what was anticipated when the deal was initiated. A total of $13.9 billion is needed to complete the buyout, much of which would consist of debt raised in the market.

A shareholder vote is expected to take place in the fall, but nagging doubts over the deal are reflected in the company's stock price. Cablevision stock trades approximately 9% below the proposed take-out price of $36.26.

Nielsen Ups Dallas, Atlanta Ranking

Atlanta and Dallas were the big winners in Nielsen's latest recalculations of U.S. TV households. Nielsen said there are 112.8 million TV households, which means that a household rating point will now be worth 1.13 million viewers (Nielsen rounds the number), up 1.3% from the current 1.11 million. The change takes effect Aug. 27.

In the key 18-49 demo, a rating point will now be worth 1.31 million viewers, up 0.3%.

Among the notable gainers, Dallas moved to sixth to fifth, switching places with San Francisco; Atlanta moved from ninth to eighth, trading slots with Washington, D.C.; Phoenix moved to 12th; Charlotte jumped to No. 25.

And starting with the new season (Sept. 22), rankings will shift with the growth of several TV markets, the majority in the South and West (more than one-half of the 51 markets that moved up are in the Sunbelt, Nielsen said).

—By John Eggerton

FCC's Martin Plans Vital Proposals

FCC Chairman Kevin Martin is looking to schedule votes on two key proposals at a Sept. 11 meeting, according to key lobbysts. One would require cable operators to carry a “viewable” DTV signal after the February transition to all-digital broadcasting. That would mean cable systems either going all digital or providing both digital and analog versions of the stations to subscribers.

The second would be an item renewing the program access rules. Those prevent exclusive programming contracts between vertically integrated media companies and the distributors—cable or satellite—in which they have a financial interest.

The renewal is said to include an arbitration element for program access complaints that has some in the cable industry concerned.

The program access rules expire Oct. 5 unless the FCC renews them, which it will almost certainly do for another five-year hitch.

The chairman's office had no comment.

—By John Eggerton

Fox Cancels 'Anchorwoman'

Fox canceled Anchorwoman late last week, booting the controversial reality show—about a former swimsuit model who becomes a news anchor—from the primetime schedule. In the tradition of highly promoted, one-and-done flops, such as ABC's Emily's Reasons Why Not last year, Fox gave the show a quick hook after it debuted last Wednesday to a miniscule 1.0 rating in the 18-49 demo.

Fox will air repeats of Til Death in its place for at least the next few weeks. Those anxious to see how Lauren Jones' journalism career turned out can do so by catching unaired episodes at and the Fox On Demand service.

—By Ben Grossman