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Media sector's capital activity plummets in July

The media sector took a big breather from the capital markets in July as the sector rounded the pandemic liquidity crunch and rested on large stockpiles of existing cash.

Media companies in the U.S., Canada and Bermuda raised about $90 million through capital offerings during the month, the lowest total for the sector by far in the past 12 months. The pullback comes after a frenzy in the capital markets a year prior as the biggest publicly traded companies sought to shore up their balance sheets amid the pandemic, analysts said.

"Media companies just aren't issuing because they don't need the capital," S&P Global Ratings senior director Naveen Sarma said. "If you're an investment-grade company, you're probably more aware of your ratings and leverage levels."

Many media companies took on heavy loads of cash liquidity during the pandemic. Sarma pointed to The Walt Disney Co. and Comcast Corp. as prime examples. Disney reported $15.89 billion in cash on its balance in the second quarter, up from $10.12 billion in the same period of 2019. Comcast reported $12.38 billion in cash and equivalents, up from $3.92 billion at the end of the second quarter 2019.

"Companies were able to get that capital last year, and there's a lot of excess cash and liquidity," Moody's debt analyst Neil Begley said in an interview, referring specifically to investment-grade public companies.

The pandemic was only part of the reason media companies turned to the capital markets. They also rushed to fund their new streaming services as competition in the over-the-top digital video business intensified rapidly, Sarma said. AT&T Inc. and Comcast both launched their respective streaming services, HBO Max and Peacock, in early 2020. Discovery Inc. is looking for over $40 billion in financing for its combination with AT&T's WarnerMedia and the new entity's global streaming ambitions, but it appears that will come in the form of loans rather than public capital raises.

In the near term, the biggest names in media will likely focus on delevering more than capital raising, Sarma said.

The majority of the capital raised by the sector during July came from common equity offerings, at about $89 million in aggregate. Media companies also raised about $1 million from debt offerings.

Capital markets activity from the sector for the year to date peaked in May, when companies raised about $7.10 billion through senior debt offerings and another $428 million through common equity offerings.

A June debt offering by radio broadcasting services provider Sirius XM Radio Inc., which is a unit of Sirius XM Holdings Inc., is the sector's largest raise for the year to date, bringing in $2.0 billion. The company said the net proceeds will be used to redeem outstanding debt.

Charter Communications Inc. and unit Charter Communications Operating LLC ranked among the sector's most active, raising a total of $5.8 billion through two separate note offerings spread across five tranches. Charter or its units accounted for four of the top 15 largest sector offerings in the year to date.

Within the broader media sector, cable and satellite companies raised the most capital year to date, with $12.23 billion in aggregate, followed by broadcasting companies with $9.75 billion and advertising companies with $6.16 billion.

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