U.K. Entertainment Stocks Mostly Up, Steady After Debt Downgrade

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Analysts say the Moody's downgrade and a drop in the value of the pound may not be a big drag on such sector players as BSkyB and ITV.

LONDON - Most big U.K. media and entertainment stocks on Monday opened largely unchanged or slightly higher despite a Friday night downgrade of Britain's debt rating.

Most European stock indexes, including the FTSE 100 in London, gained at the start of the week amid chatter that Japan would name a central bank chief who favors economic stimulus measures.

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Late Friday night, Moody's downgraded Britain's triple-A credit rating, the top possible rating, predicting that economic weakness and pressure on public finances would continue for several years. Moody's became the first of the three major ratings agencies to downgrade the U.K. rating, even though Standard & Poor's and Fitch also have Britain's debt on negative outlooks, meaning they could downgrade it at any time.

Analysts said the economic concerns mostly highlighted previously stated fears of a triple-dip recession in the U.K. and may not have much fallout for big entertainment companies.

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The stock of British TV network operator ITV was up 0.5 percent as of 9:15am London time on Monday, while shares of pay TV giant BSkyB were up 0.3 percent. Movie theater group Cineworld was up 0.7 percent. But cable operator Virgin Media saw its stock decline slightly. It was down 1.5 percent as of 9:20am.

Asked if the debt ratings downgrade would affect U.K. entertainment companies, Barclays Capital analyst Julien Roch said it was unlikely to have any immediate effects. "France lost its AAA, and it had no impact," he said.

"Most of the companies in my coverage do not have much debt, so even if interest rates on corporate debt were to rise - which is not a given, the impact would likely be low," echoed Sanford C. Bernstein analyst Claudio Aspesi.

A devaluation of the pound in recent days could affect companies with significant earnings abroad, but those are mostly publishing companies, according to analysts. Early Monday, the pound fell to its weakest level in almost 16 months against the euro.

"Companies with limited foreign revenues and more visible foreign costs, like BSkyB, sit at the opposite end - but even for them the issue is not likely to be huge and is compensated somewhat by higher earnings in euros from Ireland," Aspesi said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai