News Corp's fat wallet spooks credit investors

Credit investors are unsure why News Corp is building up so much cash and fear it could be getting ready either to buy back shares from Liberty Media, or buy some other asset.

Uncertainty about what the company might do with the cash is keeping the cost of protecting News Corp's debt against default a little higher than its peers.

But at least two traders think the uncertainty premium might be unfair. They say most of the uses of cash that investors are prepared for would be at worst neutral for the company's credit quality, and may improve it.

News Corp sold US$1.75 billion ($2.43 billion) of bonds on Wednesday, bringing its estimated total cash holdings to about US$6 billion, even though the company has only about US$1 billion of bonds maturing before the end of 2007.

Analysts and traders think News Corp could buy back shares from Liberty Media, which last month caused consternation in News Corp by boosting its holdings from 9 per cent to 17 per cent.

Some analysts believe Liberty may be trying to pressure News Corp to buy assets from it, or possibly to make it easier for Liberty to buy News Corp assets.

But News Corp may also buy more of Fox Entertainment, of which it owns 82 per cent of the outstanding shares, and 97 per cent of the voting share.

Alternatively, it may retire debt or buy back shares from investors.

- REUTERS