RUPERT'S DEBTS
The media: Paul Johnson on
what ought to happen if Murdoch faces a fire-sale
THE economic downturn, or borrowing crisis, or whatever it is — my American friends are in no doubt it is a serious recession — is beginning to garner some distinguished victims. None of us in the media care tuppence for Donald Trump or Alan Bond but when moguls like Robert Maxwell and Rupert Murdoch come under pressure, we know there's a war on. These men own some of the most famous and valuable titles in the world. Only two years ago, both were monarchs of the interna- tional jungle, swallowing giant corpora- tions like transglobal boa-constrictors. But as John of Gaunt puts it, 'Things sweet to taste prove in digestion sour,' and the mountains of debt both men have accumu- lated to expand their empires now threaten to bury them. Their cases are similar, but with important differences. Comment on Maxwell's troubles is impeded by the fact that all his financial trails disappear into the impenetrable thicket of his family holdings in Lichtenstein. Once, in an inter- view, I asked him to come clean on this topic, adding, `Telling the public what the facts are is in your own best interests.' Back came the gravelly growl: 'I am the judge of what is in my own best interests.' Murdoch's finances, by comparison, are more transparent, though they are com- plex and in some ways mysterious. He is a professional media man who likes to take his own decisions, sometimes down to a comparatively low level. Indeed, his greatest pleasure, even today, is to roll up his sleeves and settle down to producing an issue of one of his papers. That is among the reasons why I like, respect and admire him. Like all great hands-on proprietors, from Northcliffe to Beaverbrook, his com- mercial policy has been to retain control for himself and his family. This means his vast acquisitions have been financed not by issuing equity and diluting his share of it but by borrowing from the banks. In the past, the bankers have reposed great faith in Murdoch's ability to deliver, and he has never in the end disappointed them. But two of his most ambitious schemes have yet to produce positive results. In America he has tried to create a new visual-image empire by linking 20th
Century Fox, Fox Broadcasting and a fourth television network. That is a sound scheme and will eventually pay handsome- ly. In Britain he has set up Sky, another sound scheme which, ceteris paribus, will in time make a fortune for its owner. Indeed it is already earning enviable profits for Amstrad, which provides the dishes. But other things are not equal. One of these great ventures would have been enough. Two at once is too many. Worse, the timing has all gone wrong. Murdoch seems to have calculated that world interest-rates on the cash he borrowed would go down. They have gone up. He also seems to have assumed the Reagan-Thatcher boom would last for ever. But, like all booms, it has vanished into thin air, leaving a lot of people owing money they can't repay and the lenders wanting it back. Murdoch now has serious short-term cash problems and this is reflected in the ominous fall in News Corporation's share- price. The Independent on Sunday quoted a specialist on Australian stocks, Terry Povey: 'Mr Murdoch has been living beyond his means. His cash flow is nega- tive. His fate is now in the hands of his bankers.' Povey lists Murdoch's lead bank- ers as Midland, Hongkong & Shanghai, Citicorp and Manufacturers Trust. But the banking system is under strain from over- lending to people (and countries) like Murdoch, and these banks have problems of their own. The merger with Hongkong & Shanghai, which was to bolster the ailing Midland, has run into trouble. Midland is economising so fiercely that it is putting its City headquarters up for sale. The head- line in Murdoch's own flagship, the Sunday Times, said it all: 'Midland to quit head office as bad debt mounts.' Is Murdoch going to be part of that bad debt?
'.So far only the Archbishop has paid.'
Paradoxically, when banks themselves are in trouble they are less likely to harass a major debtor. They want to steer him through his difficulties and thus save their own skins as well as his. But banks do expect borrowers to meet them half way by raising cash from sales of assets. This, I fear, is what Murdoch might have 'to do, and he will hate it. He dislikes disposing of assets at any time, and this is one of the worst possible times. He particularly dis- likes selling first-class assets. Nearly all his assets are of good quality, even those not currently making money, and some are superlative. But the trouble with enforced sales is that potential buyers know the score and only the top-quality bits are really marketable at sensible prices. That is why these crash-crises end so painfully: the troubled mogul, if he survives at all, often has to part with his eye-teeth. Murdoch, like the young man in St Matthew's Gos- pel, has great possessions, and is equally unwilling to sell them. But the young man had a conscience-crisis, not a cash one, and so hung on to his properties, albeit he `went away sorrowful'. Murdoch may not have that option. So if he has to sell, what will go? There is Fox. There is Triangle. There is TNT, the highly successful opera- tion which helped him to win the Battle of Wapping. There is Australia's best domes- tic airline. There is his publishing con- glomerate, Harper-Collins. There are newspapers here, magazines there.
Above all, there is News International, with its superb parade of British titles, the Times, the Sunday Times, the Sun, the News of the World. The whole industry is going through hard times, including an advertising famine, but Murdoch's stable is in good trim. The Times, under its new editor, Simon Jenkins, is regaining weight and respectability. The Sunday Times is doing well, outselling both its chief com- petitors combined by 35,000 in September. As their new colour presses come on stream, the Sun and the News of the World are recovering the losses of the past year, the first's September figure outselling Au- gust by over 95,000 copies a day, the second by over 221,000 a week. The news from Today is not so good, but it is a marginal property. Whatever else goes, and I hope he manoeuvres his way out of selling anything, Murdoch must hang on to his paper empire here. That is what made him a media titan in the first place, it is the source of his strength and the true measure of his editorial and management skills.
My hunch is that Murdoch will survive this crisis. My personal hope is that any disposal of assets will enable him to spend more time here, making the Sun shine and the Times thunder and the News of the World rain scandals, stirring things up and causing trouble, as all good newspaper proprietors ought to do. Among other things, there is an election to be won and an Iron Lady to be rescued from a Welsh dragon.
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