The Walt Disney Co.'s Proposed Canadian Dollar Senior Unsecured Notes Rated 'A'

NEW YORK (S&P Global Ratings) March 26, 2020--S&P Global Ratings today assigned its 'A' issue-level rating to The Walt Disney Co.'s proposed seven-year Canadian dollar-denominated senior unsecured notes. The company intends to use the net proceeds from the sale of the notes for general corporate purposes, including the repayment of indebtedness (including commercial paper).
Our 'A' long-term issuer credit rating on Disney reflects its unparalleled collection of iconic brands, which includes Disney, Star Wars, Marvel, Pixar, and Avatar; the breadth and depth of its film and television studios, which it greatly enhanced with the addition of 21st Century Fox's (21CF) studio and library; its global distribution footprint, which was greatly enhanced by 21CF's cable networks and subscription video on demand services; and the broad diversity of its media and entertainment businesses. In our view, Disney remains the preeminent company for monetizing intellectual property across the full breadth of its businesses.
The negative outlook reflects the uncertainty around the effect of the coronavirus pandemic on the global economy and, specifically, how it might affect Disney's ability to reduce its leverage under 2.5x by the end of fiscal year 2021 (as we had previously expected). The company's S&P Global Ratings-adjusted leverage, which includes less than 10 months of contributions from 21CF, was elevated at 3.2x as of Dec. 31, 2019. Given the limited financial tools available to Disney to reduce its leverage (it suspended its share repurchases when it announced the acquisition of 21CF), we believe the company would need to outperform our operating expectations--especially in its theme parks and direct-to-consumer services--once the economic outlook improves.
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