S&P cuts Walt Disney

S&P said it lowered its ratings on the Walt Disney Co. a notch, including the issuer rating to BBB+ from A- and removed all its ratings from CreditWatch with negative implications.

“We no longer believe Disney can reduce leverage below 3x by the end of fiscal 2022. Our original operating assumptions underlying the former A- issuer credit rating assumed an economic recovery from the pandemic in the latter half of 2020, with a return to more normalized operating activity at Disney’s theme parks by the end of 2020,” S&P said in a press release.

The agency said it now forecasts that Disney’s operating performance at its two hardest-hit segments (theme parks and movie studios) will not begin to normalize (return to 2019 levels) until fiscal 2022 (ending Sept. 30). S&P said it forecasts it could take all of fiscal 2022 for revenues at the theme parks and studio entertainment to return to pre-pandemic levels.

The agency assigned a negative outlook. The outlook reflects the uncertainty over the path to global economic normalcy, the elevated cash flow burn to implement its global direct-to-consumer strategy and how long it will take to lower adjusted leverage to 3.5x, S&P said.

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