This website uses cookies, pixel tags, and similar technologies (“Cookies”) for the purpose of enabling site operations and for performance, personalisation, and marketing purposes. We use our own Cookies and some from third parties. Only essential Cookies are used by default. By clicking “Accept All” you consent to the use of non-essential Cookies (i.e., functional, analytics, and marketing Cookies) and the related processing of personal data. You can manage your consent preferences by clicking Manage Preferences. You may withdraw a consent at any time by using the link “Cookie Preferences” in the footer of our website.
Our Privacy Notice is accessible here. To learn more about the use of Cookies on our website, please view our Cookie Notice.
Debt issued by broadcast media companies sold off hard this week, as a carriage dispute between Disney and Charter Communications highlighted industry-wide problems.
Companies hit by the selloff include Nexstar, EW Scripps, Gray Television, Sinclair Broadcast Group, Tegna, Univision Communications and AMC Networks, as well as Charter itself.
“It’s been super topical and active,” a high yield trader said. “I see some of these names trading a lot every day.”
Among the biggest decliners were EW Scripps’ $500m 5.375% notes due 2031, which are quoted at 64.39 compared to 71.094 at the start the week, and Gray Television’s $800m 4.75% senior notes due 2030, which are down to 64.2 from 68.609 over the same period.
Relative value on high yield broadcast bonds (via 9fin)
The tumult started when several Disney channels — including ABC and ESPN — disappeared from Spectrum, Charter’s cable TV service in late August, after the two companies failed to reach a new distribution agreement.
For its part, Charter said on 1 September that it has been paying $2.2bn annually for Disney programming that roughly 25% of its video subscribers “regularly engage with” and that it has “already reached the point of economic indifference with the current model.”
Final straw
There is precedent for these kinds of carriage-fee disputes, and broadcast companies have been under pressure from cord-cutting for a while. Nevertheless, debt investors said this latest dispute could represent an inflection point for the industry.
“The Disney-Charter fight lit a match on something that was lathered in gasoline,” the trader said.
With the exception of Charter, none of the broadcast companies whose debt sold off this week are directly impacted by the Disney dispute. But some are involved in similar fights (Nexstar has been battling with DirectTV since July) and the broadcast industry as a whole is seen as increasingly precarious.
“It just plays into the narrative that the media ecosystem is being disrupted, in terms of people leaving cable and going direct to consumer,” said an analyst following the sector.
Another industry analyst we spoke to pointed to other factors in the selloff: the ongoing strikes in Hollywood, softer advertising sales, and overall weakness in the high yield index this month.
Investors seem to be dumping broadcast credits indiscriminately, the analyst said: “They’re all kind of being viewed through the same lens, even though they’re not exactly the same value proposition. Nexstar is more news, while Charter is a cable company.”
This big-picture uncertainty has led some investors to lean into the trade, somewhat like the legacy telecom selloff in July, which was sparked by a Wall Street Journal report about toxic lead cables buried all over the US.
But barring any other major news from the space, the broadcast upheaval may be over for now, sources said.
“It’s probably getting to levels where the momentum trade is over, guys are going to have to do the fundamental credit work,” said the trader.
