News America Talks Tough on Valassis Appeal But Borrows $1B, Just in Case

Last Updated Sep 2, 2009 4:46 PM EDT

News America Marketing's corporate parent is talking tough about winning its appeal of the $300 million jury verdict won by Valassis in a Michigan state court for NAM's monopoly tactics in the supermarket advertising business -- but it also borrowed another $1 billion ... just in case.

In recent SEC filings, News Corp. (the Rupert Murdoch-owned parent of NAM), said it was confident of winning an appeal that would reverse the verdict, and that it was thus making no financial provision to pay for it beyond a $25 million bond. However, News Corp.'s News America Inc. unit raised $1 billion in debt in August. It also raised $1 billion in February.

On Aug. 12, News Corp. said of the litigation:

Based on the Company's review of the record in this case, including discussion with and analysis by counsel of the bases for News America's appeal, the Company has determined that News America has a number of strong arguments available on appeal and, although there can be no assurance as to the ultimate outcome, the Company is confident that the judgment against News America will ultimately be reversed, or remanded for a new trial in which, the Company believes, News America would prevail.
As a result, the Company has concluded that it is not probable that Valassis will ultimately prevail in this matter; therefore, the Company has not recorded any liability for this judgment.
But just eight days later, News America announced it had borrowed $1 billion from the debt markets:
News America will receive gross proceeds of $997,624,000 from this offering and expects to use the net proceeds for general corporate purposes.
News Corp. did the same thing in February after it settled and acquired Floorgraphics in a similar suit. If NAM loses a similar suit in federal court, also filed by Valassis, its liabilities could reach $1.2 billion.