Moody's assesses potential recession impact on media


Moody’s Investors Service says many major US media companies, such as Viacom, Time Warner, Comcast and Cox Communications, should hold up pretty well if the US economy slips into recession in the next couple of years. Who looks more risky? Moody’s names New York Times Co., Clear Channel Communications, Gannett and Belo.

"We want to highlight varying degrees of rating vulnerability should recent disruptions in the US housing, subprime mortgage, and credit  markets begin to more broadly affect job creation, consumer confidence,  and overall economic activity," said Moody’s Senior Vice President Neil Begley, a co-author of the report. "Such a contagion could negatively affect revenue at rated firms because of exposure to economically sensitive consumer and business spending, particularly print and broadcast advertising," he said.

But, will there be a recession? Begley said the rating agency was not predicting a recession or even stating that one is likely, which is why current conditions have not prompted changes in rating outlooks. Though with the rise in risk-aversion among creditors, the current likelihood of a recession may be the highest it has been since 2003, according to Moody’s chief economist John Lonski. However, it’s important to note that the probability the current economic recovery will continue through mid-2008 may be close to 75%, making a recession less likely, Moody’s said.

The full report is "Investment-Grade U.S. Media and Entertainment:
Sustainability of Current Credit Ratings in a Recession." It identifies Cox Enterprises and Clear Channel as the most vulnerable to refinancing risks, "as maturities through 2009 exceed the sum of existing cash, stressed cash flow and external committed facilities."