The parent company of the Daily Mail has been warned it could face a credit downgrade if it took on debt to fund its £500m acquisition of Telegraph titles.
US credit ratings agency S&P Global Ratings said Rothermere Continuation Holdings Ltd (RCHL), the Jersey-based parent of Lord Rothermere’s assets including the Daily Mail, Mail on Sunday, Metro and iPaper, has been placed on “credit watch” as it looks to put together a funding package for a formal deal in the coming weeks.
“The details and funding of the transaction are unclear, but in our view there is limited scope for RCHL to accommodate any additional financial debt under our BB- long-term issuer credit rating, considering its limited size and the fact that Telegraph Media Group (TMG) operates in structurally challenged newsprint and advertising markets,” S&P analysts said in the note.
The note said that given TMG’s significant valuation at £500 million compared to RCHL’s “modest size and scale”, S&P believes the transaction “could materially increase its adjusted leverage beyond our limits”.
On Saturday, Rothermere Daily Mail & General Trust (DMGT) announced a £500m deal with Redbird IMI to buy the Telegraph titles. Both parties have entered into a period of exclusivity and aim to rapidly close the terms of the transaction. However, there is significant speculation over how Rothermere will finance the deal.
Most analysts believe the Telegraph titles are worth around £350m, and the DMGT has said that to comply with foreign state influence rules, there will be no foreign state investment or capital in its funding structure.
Some observers have speculated that this could still leave open the possibility of funding from foreign sources that are not state-owned or sovereign wealth funds. Two years ago DMGT was in talks with Qatari investors about supporting a bid for Telegraph Group, but later decided against the move.
Rothermere’s businesses, which also include Middle East-based events operations and property information services in the UK and US, generated revenues of £1.1bn in the year to 30 September 2024 and adjusted pre-tax profits of £78m.
The consumer media business made revenues of £613m and £53m in adjusted operating profit. The property information division, which includes Trepp in the US and Landmark and Yopa in the UK, reported £219 million in revenue and adjusted operating profit of £22 million.
The events and exhibitions arm – which hosts four of its five largest events in Abu Dhabi, Dubai, Saudi Arabia and Egypt – saw revenues rise 67% year-on-year to £272 million, as adjusted operating profit more than doubled to £42 million.
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Last month, DMGT announced a £906m restructuring to create a new parent company, RCHL, a move that effectively split DMGT and its non-UK subsidiaries.
The RCHL is controlled by a discretionary trust which is held for the benefit of Rothermere and his immediate family.
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