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S&P downgrades Disney
S&P said it lowered the ratings on the Walt Disney Co., including its issuer credit and issue-level ratings to A from A+.
The agency also said it removed the ratings on Disney from CreditWatch, where they were placed in December.
As a result of the downgrade, S&P said it lowered the short-term rating on Disney to A-1 from A-1+.
The agency also assigned an A issuer credit rating to the proposed new parent company, TWDC Holdco 613 Corp.
TWDC Holdco 613, which will be renamed the Walt Disney Co., is poised to complete its acquisition of much of Twenty-First Century Fox Inc.
At the same time, Disney will become the new parent company and the former parent, the Walt Disney Co., which was renamed TWDC Enterprises 18 Corp., and Twenty-First Century Fox will become wholly owned subsidiaries.
The rest of Twenty-First Century Fox, including the Fox broadcast network, the 28 owned and operated stations, Fox News cable network and the national sports networks, will be spun off into a new company, Fox Corp., S&P said.
Disney is required by the U.S. Department of Justice to sell the regional sports networks in order to get regulatory approval for the transaction, the agency noted.
The downgrade reflects operational risks as a result of the transaction, S&P said.
While the base-case forecast shows that Disney could reduce leverage back to less than 2x within two years, the agency said it believes Disney faces internal and external challenges that could delay that de-leveraging process, resulting in adjusted leverage remaining at higher than 2x.
The stable outlook reflects a belief that Disney will be able to navigate the strategic shift and potential economic downturn without breaching the 2.5x downside threshold, S&P added.
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