News Corp’s BSkyB bid could hit credit rating

Steve Dinneen
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NEWS Corp could have its credit rating cut if it is forced to bid more than 850p a share for BSkyB, according to analysts at Jefferies.

Shares in the broadcaster closed last night at a record 823p – far ahead of its pre-recession peak of 713p – on the expectation of a much improved offer from Rupert Murdoch, who bid 700p a share in September.

Standard & Poor’s said last year that a bid of 840p may have a negative impact on News Corp’s BBB+ rating, which the firm is desperate to maintain. Given higher earnings and a reduction in debt at both firms, Jefferies said this is now likely to stand closer to 850p.

News Corp has been hit by a 10 per cent appreciation in the pound versus the dollar. Jefferies said if News Corp had hedged against exchange risks, it may have been able to raise the bid over 900p while “maintaining reasonable leverage”.

But News Corp last night told City A.M.: “We have not undertaken any currency hedging related to the BSkyB transaction.”

Murdoch’s firm yesterday escaped the prospect of a lengthy Competition Commission probe into the takeover after offering to spin off Sky News.

The ruling has set the scene for a battle between the Sky board and News Corp.

Investors are pushing for a price of more than 900p a share but sources close to News Corp say it will not budge from its valuation of 750p to 800p.