According to a recent study by Standard & Poor’s Ratings, media and entertainment is one of the three most troubled sectors of the bond market. (The other two are consumer products and health care.)
S&P identified 123 companies in these three sectors with at least one of the following three indicators of weakness: bonds trading with yields more than 1,000 basis points (10 percentage points) higher than Treasuries; companies with S&P credit ratings of B- or lower and negative outlooks; and companies that face potential credit downgrades.
Media and entertainment companies that met one or more of those criteria totaled 68, or 55.3% of the whole group.
By S&P’s definition, the media group is wide-ranging and includes newspapers and printing companies. But among the weak are eight broadcasters, including Clear Channel and Nextstar; 19 gaming companies, including Peninsula Gaming and Scientific Games; and others such as theater operator Wallace Theater Holdings and music publisher and recording-artist services shingle WMG Acquisition Corp.
S&P rates 89% of the 68 media and entertainment companies as “speculative grade.” Technically, that means they are rated BB+ or lower. In investing parlance, these companies issue “junk” bonds.
Within the speculative grade, 28% of media and entertainment companies are rated B- or lower compared with 17% of all nonfinancial issuers.
Despite the weakness of the industry, media and entertainment companies floated 33 new junk bond issues in 2011.