The Daily Mail’s parent company has been warned it could face a credit downgrade if it loads up with debt to fund its £500m takeover of the Telegraph titles.
The US credit ratings agency S&P Global Ratings said Rothermere Continuation Holdings Ltd (RCHL) – the Jersey-based parent company of Lord Rothermere’s assets including the Daily Mail, Mail on Sunday, Metro and the i Paper – had been put on “credit watch” as it seeks to put a funding package in place to table a formal deal in the coming weeks.
“The detail and funding of the transaction remain unclear but, in our view RCHL has limited headroom under our BB- long-term issuer credit rating to accommodate any additional financial debt, 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 the significant valuation of TMG at £500m, compared with RCHL’s “modest size and scale”, S&P believed the transaction might “materially increase its adjusted leverage beyond our threshold”.
On Saturday, Rothermere’s Daily Mail and General Trust (DMGT) announced a £500m deal with RedBird IMI to buy the Telegraph titles. The two parties have entered a period of exclusivity and aim to complete the terms of the transaction swiftly. However, there is significant speculation over how Rothermere will fund the deal.
Most analysts believe that the Telegraph titles are worth about £350m, and DMGT has said that in order to comply with foreign state influence rules, there would 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 had been in talks with Qatari investors about backing a bid for the Telegraph group, but later decided against the move.
Rothermere’s businesses, which also include a Middle East-based events operation and property information services in the UK and US, made £1.1bn in revenues and adjusted pre-tax profits of £78m in the year to 30 September 2024.
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 £219m in revenues and adjusted operating profits of £22m.
The events and exhibition arm – which hosts four of its five biggest events in Abu Dhabi, Dubai, Saudi Arabia and Egypt – saw revenues increase 67% year-on-year to £272m as adjusted operating profits more than doubled to £42m.
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Last month, DMGT announced a £906m reorganisation to create a new parent company, RCHL, a move that effectively split DMGT and the non-UK subsidiaries.
RCHL is controlled by a discretionary trust which is held for the benefit of Rothermere and his immediate family.