Rupert Murdoch’s New Corporation is continuing its cost-cutting ways while intriguingly raising $US1 billion in US financial markets, despite the spin from last week’s profit announcement that the company was well cashed-up.
News Corp has sacked staff at US publishers, Harper Collins, in New York and there were also reports from London that jobs would go at News International, the UK newspaper group that’s home to The Times, The Sunday Times, The Sun, The News of the World and a host of local and suburban papers. Some reports claim between 100 and 200 editorial jobs could go. The sackings come a few days after 25 jobs went in the newsroom of the Wall Street Journal.
It has also revamped and cut the business model for MyNetworkTV which is a quasi-Free To Air TV network launched in September 2006. It will change from a broadcast network model to a “hybrid” service that would continue to supply programs to Fox TV affiliate stations in the US on a very low cost basis.
News Corp’s $US1 billion bond raising was the surprise. Murdoch had boasted last week that the $US3.621 billion cash the company had on hand was enough to pay interest on the company’s debt for the next seven years. It’s yet another example of not taking Murdoch at his word: when he says things are OK, expect something contrary to emerge from the company.
News Corp’s raising of $US1 billion in 10 and 30-year money was completed in two tranches and came at a hefty 4%-plus premium over the US Treasury bond yields.
The first tranche was $US700 million of 10-year, 6.9% priced to yield 410 basis points (4.10%) more than Treasuries of similar maturity, and $300 million of 30-year, 7.85% percent bonds that paid a spread of 437.5 basis points (4.375%) over the 30-year T-bond. Expensive money, but investors are obviously still prepared to lend to News, even though it was rated on the third lowest of investment grade ratings by Moody’s rating agency.
News Corp has been chopping across the company, and refusing to detail the extent of the cuts, such as in Australia where hundreds of jobs have gone, or are going in all papers.
Australian newspapers suffered in the December quarter with big drops in revenues and earnings in both Australian and in US dollar terms. But the real problem is in the US TV business where earnings are now approaching break-even or worse, hence the restructure of the money-losing MyNetwork this week.