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Disney, reeling from the coronavirus, raises $6 billion in debt offering

Tribune News Service logo Tribune News Service 3/20/2020 By Meg James, Los Angeles Times
a building that has a sign on the side of a road: The Walt Disney Co. on Friday, March 20, 2020 said it had raised nearly $6 billion in a debt offering. © Dreamstime/Dreamstime/TNS The Walt Disney Co. on Friday, March 20, 2020 said it had raised nearly $6 billion in a debt offering.

Buffeted by the coronavirus outbreak, the Walt Disney Co. on Friday said it had raised nearly $6 billion in a debt offering.

The move, which comes one week after Disney closed its domestic theme parks, suspended cruise ship sailings and pulled a high-profile movie release, underscores the magnitude of the damage to the Burbank entertainment giant from the novel coronavirus.

“The outbreak of the novel coronavirus (“COVID-19”) and measures to prevent its spread are affecting our business in a number of ways, which should be considered in connection with an investment in the notes,” Disney said Friday in a Securities & Exchange Commission filing.

Disney raised the money — $5.98 billion — through five sets of notes that would expire between 2025 and 2050, according to the filing.

The debt offering comes just one year after Disney completed the $71 billion purchase of much of Rupert Murdoch’s 21st Century Fox. Disney Executive Chairman Bob Iger viewed the Fox takeover as a way to fortify the company for the streaming age.

But the blockbuster deal more than doubled Disney’s debt to nearly $48 billion.

In the wake of the global pandemic, ratings agencies have reassessed Disney’s credit rating. On Wednesday, Fitch Ratings downgraded Disney’s credit outlook to “negative” from “stable.”

The economic effect of the coronavirus has been devastating to the company. Disney’s theme parks are closed around the world, and its cruise ships are stuck in harbors.

Move theater closures have erased another big source of revenue for the company because Walt Disney Studios relies heavily on its box office blockbusters. And its longtime profit engine, ESPN, is trying to cobble together a compelling lineup due to mass cancellations of live sports. Analysts say ESPN could lose 80% of its advertising revenue.

Investors also worry that a recession could prevent a return to business as usual, as leisure spending is discretionary and households will have less income for such extras.

The challenges follow a recent changing of the guard as longtime Chief Executive Bob Iger handed the day-to-day operations over to Bob Chapek, who had run Disney’s parks and attractions.

Disney’s stock tumbled another 9.4% on Friday, or $8.95 a share to $85.98. The stock has fallen 38% since Feb. 20, when the market began worrying about the economic toll of the coronavirus.


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