Hacking scandal earns News Corp. credit warning
WASHINGTON — Standard & Poor’s on Monday placed News Corp.’s credit rating on a negative watch citing increased business and reputation risks from investigations into the widening phone hacking scandal in Britain.
“Since our last research update on July 13, the UK legal process has expanded and pressure from US lawmakers has increased for an FBI probe” into the practices of News Corp.’s media holdings in both countries, S&P said.
“We see the risk that, if evidence arises sufficient to bring a criminal charge against the company or any current or former employee of the company, then prosecuting authorities in the US could proceed with those charges,” S&P analyst Michael Altberg said in a statement.
The ratings agency placed News Corp.’s BBB+ rating on a negative watch following the arrest late last week of Rebekah Brooks, head of the group’s British newspaper arm, and the resignation of Les Hinton, head of Wall Street Journal owner Dow Jones & Co., another essential News Corp unit.
Both have long been trusted lieutenants of News Corp.’s powerful owner Rupert Murdoch.
S&P cited the “weakening of the company’s executive bench strength,” “the loss of reputation that alienates current and potential clients” and the company being forced to abandon strategic business opportunities, like the planned full takeover of British broadcaster BSkyB, which was dropped after the scandal broke.