S&P Global Thursday lowered Walt Disney’s credit rating to A- (still at the higher end of investment grade) as the company’s theme parks and film and TV studios remain closed by social di…
and film and TV studios remain closed by social distancing orders and it’s unclear when they will be allowed to reopen.
The actual hit to operating performance so far will be revealed when Disney reports its January-March quarterly results May 5. S&P said it doubts Disney theme parks will return to normal capacity at the same rate as the overall economy even after stay-at-home restrictions are lifted because of continued social distancing and consumer concerns about public events. As a result, S&P expects Disney’s leverage – or the amount of debt it carries relative to its cash flow – to climb for the next two years.
ESPN is losing advertising revenues from both the overall advertising recession and the steep decline in audience ratings from the cancellation of live sports. S&P Global said it expects to resolve the credit watch listing “as we get clarity on when the U.S. parks will reopen and what a post-COVID-19 world will look like.” S&P could lower the credit rating further if it no longer believe that the company can reduce leverage, or it could revise the outlook to stable if it sees a clear path for Disney to lower it – like theme parks reopening sooner than expected and attendance returning closer to 2019 levels.
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