Few media companies tapped the U.S. public stock and bond markets during the third quarter of 1992, leaving corporate strategists and investment bankers on the sidelines waiting for some catalyst to trigger an upswing.
Public financing volume fell off more than 46% for the three months ended Sept. 30. The volume of new debt raised was $ 1.135 billion, down from $ 2.1 billion in the second quarter, according to statistics compiled by IDD Information Services and Daily Variety.
Newly issued public stock by media companies fell to $ 238.7 million, compared to $ 418.5 million in fresh stock in the second quarter.
U.S. mergers and acquisitions transactions among media companies have also been squeezed. The volume of M&A dealmaking fell off by more than 50% to $ 1.6 billion in the third quarter, compared to $ 3.3 billion in the second quarter.
Overall, media financing momentum has been stalled by a number of market factors compared to the booming ’80’s, when one big merger announcement could lead to a domino effect of new stock and bond issues.
“There’s been so much consolidation in the industry that there’s not a lot of deals, and not a lot on the horizon,” said Jessica Reif, a media analyst with Oppenheimer & Co. in New York.
Unlike the second quarter, when a handful of media companies raised cheap debt, the presidential election has provoked interest rate uncertainties over the third quarter, keeping even the most opportunistic corporate treasurers out of the market.
Not many public media financings are registered with the Securities & Exchange Commission for the year’s fourth quarter, Reif noted.
While News Corp. stirred up the public market last month, coming in for about $ 1.6 billion in new stock and bond financing, 1992 overall is likely to be viewed as a year of financial lethargy for most media companies.
Scott Marden, a managing director at Bear Stearns in New York, noted that while the M&A business has been slow “across the board,” media transactions are stalled mostly over prices. “Values got so inflated during the later half of the ’80’s and we’re now seeing a continual hold off on the part of sellers, who aren’t dropping from high asking prices,” he explained. Properties are available , he added, “to anyone willing to step up to the price.”
Current market conditions, however, have proven a boon to some media companies in terms of demand for paper by investors, resulting in cheap and opportunistic financing for debt issuers.
Most third-quarter debt financing activity continued to be dominated by highly leveraged U.S. cable companies, such as Jones Intercable and Century Communications, which are replacing high interest junk debt with bonds bearing lower coupons or paring down bank debt, or a combination of both.
One of the biggest debt issuers in U.S. capital markets this year has been a foreign company, Rogers Cablesystems, Canada’s largest cable operator.
The company raised $ 450 million in debt in the third quarter. Since 1991, it has raised $ 1.6 billion in fresh junk bonds and an additional $ 250 million of equity in the U.S. as a way to reduce its Canadian bank debt.
Sally Moyer Kent, director of financial planning at Rogers, partly attributed a hungry institutional investor base of insurance companies and pension funds to the company’s success in its completing its refinancing program.
In August, Boston-based Continental Cablevision completed a $ 1.3 billion refinancing, consisting of an equity placement, senior subordinated debt, and a new credit facility. Corporate Partners, an equity fund, purchased $ 400 million of the company’s preferred stock, giving it a 19% stake in the company.
In the third quarter, Continental Cablevision also ventured into M&A, when one of its units formed a limited partnership with Meredith/New Heritage Partnership to purchase the stock of North Central Cable Communications, a 103, 000-subscriber cable system in the Minneapolis/St. Paul area for $ 220 million.
Adelphia Communications, the 10th largest U.S. cable operator, also tapped the debt markets for $ 125 million in the third quarter at an 11 7/8 coupon. The company is using the proceeds from this offering to pare down its $ 1.6 billion in bank debt.
Paramount Communications, which has more than $ 1 billion in cash in its coffers, was one of the few big names to tap the public debt market for opportunistic reasons, raising cheap cash through long dated bonds.
In August, Par issued $ 250 million in new debt through 10-yearpaper with an 8.25 coupon. In one of the few major acquisitions of the quarter, Par also expanded into the theme park business, with its $ 400 million buyout of Kings World Entertainment Co.
Smaller merger deals effective in the third quarter include Spelling Entertainment Inc.’s $ 64 million purchase of the film rights of Carolco Television as well as Charter Co.’s acquisition of Spelling Entertainment for $ 42 million.
Only three media companies issued stock in the public market during the third quarter, with Turner Broadcasting issuing 11 1/2 million shares at $ 18 3/8 in September.
The offering was significant since the bulk of Turner shares are owned by Ted Turner, Time Warner and TCI.
While the market value of the company’s equity is $ 5.1 billion, only about $ 800 million of the company’s stock is publicly held.