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Filling a war chest

News Corp. may use loans in Liberty buyback

NEW YORK — Wall Street wondered Wednesday whether News Corp.’s move to raise a massive $1.7 billion in debt could be part of a plan to wrest stock back from John Malone, who has sharply upped his stake in Rupert Murdoch’s generally well-guarded empire.

Fulcrum Global Partners analyst Richard Greenfield — characterizing the transaction as “rather odd” — said News Corp. hardly needs the cash. He speculated that the conglom could use a chunk of the money to buy back stock from Malone’s Liberty Media at a discount, so as to split the avoided tax charge.

“If News Corp. had no cash sitting on their balance sheet, one might reason that it makes sense to raise debt to refinance the QPL/Cruden debt they just assumed, but News Corp. has billions of cash sitting on its balance sheet, with mostly long-term debt they do not need to refinance,” Greenfield wrote in a note.

Merrill Lynch analyst Jessica Reif Cohen offered the same sentiment, saying the debt financing could be “indicative of discussions tied to Liberty Media’s News Corp. holdings.”

Standard & Poor’s also took keen notice of News Corp.’s debt issue, saying Wednesday that it may upgrade the conglom’s rating by one notch, from BBB-minus to BBB.

Any upgrade could lower interest rates for News Corp., which recently moved to the U.S. Standard & Poor’s noted that the debt issue would raise the conglom’s cash holdings to nearly $6 billion.

News Corp. wasn’t commenting on what the money would be used for.

In recent weeks, Malone engineered a deal to increase his voting stake in News Corp. from 9% to 17%. At that level of interest, Malone would be uncomfortably close to the Murdoch family’s 30% voting stake.

To ward off Malone, News Corp.’s board quickly adopted a so-called poison pill, which could prevent Malone — or anyone else — from acquiring News Corp. simply by buying up enough shares to take control.

Murdoch said Liberty has only a 49% stake in Discovery, making it a less attractive property than it otherwise would be. News Corp. likewise has little interest in Starz.

Buying back stock in a cash-rich spinoff would be a way for Murdoch to solve the situation without having to buy Liberty assets, according to Greenfield.

News Corp. closed up 1.11% at $18.29.

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