News Corp’s Investment Grade Upgrade: A Catalyst for Growth?

News Corp (NASDAQ: NWSA) has received a significant boost to its financial credibility after both S&P Global Ratings and Moody’s upgraded its credit ratings to investment-grade status. The upgrades, driven by the company’s strategic sale of Foxtel to DAZN and improved balance sheet metrics, could position the media giant for a sustained period of outperformance. Here’s why investors should take note.

The Ratings Upgrade: A Milestone Achievement

S&P upgraded News Corp’s rating to BBB-, while Moody’s moved its rating to Baa3, both marking the first time the company has achieved investment-grade status in years. The upgrades reflect reduced leverage and enhanced financial flexibility following the $3.4 billion sale of Foxtel. Key to this shift was the repayment of $574 million in shareholder loans to News Corp upon closing the deal, which immediately reduced debt and bolstered liquidity.

The Foxtel transaction, valued at 7x its fiscal 2024 EBITDA, also allows News Corp to retain a 6% stake in DAZN, the buyer, creating a potential upside for future capital returns.

Why the Foxtel Sale Matters

The Foxtel sale is the linchpin of News Corp’s turnaround. By divesting a non-core asset, the company has redirected capital toward higher-margin businesses like its digital real estate platforms (e.g., Realtor.com), education tech, and news media divisions. The transaction’s terms—$3.4 billion in proceeds—will allow News Corp to reduce debt and increase shareholder returns through buybacks or dividends.

The sale also aligns with CEO Robert Thomson’s long-term strategy of focusing on recurring revenue streams and cost discipline. As Moody’s noted, News Corp’s leverage ratio (debt/EBITDA) is now projected to fall below 2.0x, a stark improvement from the 3.0x threshold that previously limited its rating.

Investment Implications: A Breakout on the Horizon?

Investors should view the ratings upgrade as a confidence vote in News Corp’s financial stewardship. Companies with investment-grade ratings typically enjoy lower borrowing costs, greater access to capital markets, and reduced refinancing risks. For News Corp, this could translate into:
- Lower interest expenses: With reduced debt and cheaper financing, free cash flow could rise by $50–100 million annually.
- Share buybacks/dividends: The company has historically prioritized capital returns, and excess cash from Foxtel’s sale could accelerate this trend.
- Strategic flexibility: A stronger balance sheet allows News Corp to pursue acquisitions or investments in high-growth areas like AI-driven content creation or subscription services.

Risks and Considerations

While the upgrade is a positive catalyst, risks remain. The media sector faces secular challenges like declining print revenue and intensifying competition in digital advertising. Additionally, News Corp’s reliance on cyclical businesses (e.g., real estate listings) could pressure margins during economic downturns.

Conclusion: A Strong Foundation for Growth

News Corp’s ascent to investment-grade status marks a pivotal inflection point. With debt under control, capital returns on the horizon, and a focus on high-margin segments, the company is positioned to outperform peers. Key data points underscore this thesis:
- Foxtel sale proceeds: ~$3.4 billion in cash, reducing net debt by ~30%.
- Leverage improvement: Pro forma debt/EBITDA of 1.8x (vs. 3.0x in 2022).
- Historical returns: The stock has outperformed the S&P 500 by +20% over the past five years, even without the Foxtel windfall.

Investors seeking a media play with a clear path to deleveraging and growth should consider News Corp. The ratings upgrade isn’t just a technicality—it’s a signal that this once-undervalued company is now primed for a sustained breakout.

In a sector littered with cautionary tales, News Corp’s disciplined execution and strategic asset sales make it a compelling buy. The next move? Capitalizing on its newfound financial strength to dominate in its core markets—and rewarding shareholders along the way.