Refilling their piggy banks
GE fattens coffers with $12 bil offering as biz firms get conservativeSome smaller media and entertainment firms have started preserving cash amid the continuing credit and financial markets crisis, but most sector biggies seem to be weathering the storm.
One special case is NBC Universal parent GE. The conglomerate Wednesday unveiled an offering of at least $12 billion in common stock. Also, Warren Buffett's Berkshire Hathaway agreed to buy $3 billion in preferred stock from GE in a private offering. Both are ways for GE to boost its capital cushion given its big exposure to turbulent financial markets via its finance arm, which accounts for nearly half of its overall revenue.
Buffett seeing value in GE shares and GE's ability to raise such a large amount of money, was seen by some as a bullish development. Bears, though, wondered why GE would need such a wad of cash and noted that Buffett was buying GE shares below market value. Bears won the day, and the Dow fell fractionally Wednesday while GE was off 4%.
"It enhances our flexibility and allows us to execute on our liquidity plan even faster," GE CEO Jeff Immelt said. "Second, it gives us the opportunity to play offense in this market should conditions allow."
Otherwise, Wall Street observers mostly mention Tribune Co., newspapers and smaller broadcasting players as facing liquidity and credit covenant challenges in the current environment. Some of the companies rely heavily on credit facilities, and these usually require a certain operating performance.
This week, for example, film exhibitor Carmike Cinemas said it has stopped its quarterly dividend payments, which amounted to $9 million during the past year, and prepaid $10 million in bank debt, allowing it to remain in compliance with all credit facility covenants as of September.
A report released this week by debt ratings agency Fitch Ratings said that media companies have "generally healthy" liquidity, with diversified media and entertainment companies, such as Disney, Time Warner, News Corp., CBS and Viacom "the best positioned to weather the current financial market conditions" thanks to predictable revenue and free cash flow.
Paul Bond in Los Angeles contributed to this report.