Big guys get margin orders, too

Moguls' personal stock holdings jeopardized in downturn

NEW YORK -- Media moguls are among those sighing with relief after Monday's market rally.

After all, there have been signs in recent days that the global financial crisis, credit crunch and plunging stock values could cost industry leaders at least some of the stock holdings in their companies.

"No doubt that even the moguls are affected by this," Sanford C. Bernstein analyst Michael Nathanson said. "Folks worry that more selling will occur."

The first one to be hit beyond any doubt was Sumner Redstone, controlling shareholder of CBS Corp. and Viacom. As announced before the weekend, the entertainment industry pioneer's National Amusements had to sell some $233 million in nonvoting shares of CBS and Viacom on Monday to pay down debt and stay current with its credit covenants.

While he didn't lose any of his voting stock and voting power, some suggest that still could happen.

"We are concerned that the National Amusements covenants could be tied to the value, and hence share price, of CBS and Viacom, which could precipitate more selling," Goldman Sachs analyst Mark Wienkes wrote in a report Monday.

NA said Monday that it plans no further stock sales, but Barclays Capital analyst Anthony DiClemente also suggested there could change if CBS and Viacom shares fall further. "We believe that NA's credit agreement is collateralized with the value of Viacom and CBS shares," he said in a note to investors, "and as such, the further the value of CBS and VIA declines, the more NA must sell in order to comply with covenants."

Redstone might not be alone.

Some on the Street suspect that John Malone sold $49.5 million of stock in his Liberty Media back to the company this month to boost his financial flexibility as well.

The move, announced in a regulatory filing that provided no explanation, surprised analysts and investors because it reduced Malone's ownership of Liberty shares from 7.2 million to 2.7 million. Some took it as a sign that Malone sees little upside in the company. Liberty wouldn't comment further on the move.

"No one outside knows the full story, but it seems reasonable to presume that the Malone sale was similarly motivated" as the Redstone sale, said Hal Vogel, president of Vogel Capital Management.

Malone may well have gotten a margin call from his broker -- like many other investors in recent weeks. A margin call comes if one or more of the securities a client has bought with borrowed money decrease in value past a certain point, forcing the client to deposit more cash or sell off some assets. Malone doesn't earn a big salary but instead has more of his wealth in the form of stakes in his companies.

Either way, after the recent bloodbath in the stock market, some say it's a question of when -- rather than if -- the next victim among industry leaders turns up.

"Inevitably, someone else will show up on this problem list," Vogel said.

But industry leaders who own significant amounts of stock in their empires are high on observers' shortlist.

Cablevision Systems owners the Dolan family and Dish Networks and EchoStar chairman Charles Ergen are among the names industry observers on the Street mention as potentially at risk if the financial and credit crunch continue.

Those companies declined comment.

Meanwhile, News Corp. CEO Rupert Murdoch has a reputation for playing his financial affairs more conservatively and shying away from too much debt after narrowly avoiding bankruptcy in the 1990s.

In many cases, reduced ownership power of moguls would be welcomed by investors.

"Let's be clear: Many investors are rooting for more forced sales from National Amusements so that the company's hold on Viacom's voting shares can be loosened, which would potentially invite M&A speculation in," Nathanson said in a report Monday. "Viacom, under an independent voting structure, would not exist (as a separate company) long at these current valuations."
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