The Walt Disney Company Files for $6 Billion in Debt Offering

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Credit: Walt Disney Company

It doesn’t take much to see that the outbreak of the coronavirus known as COVID-19 has taken a serious toll on the Walt Disney Company. Since late January, one by one every beloved theme park closed its doors starting in Shanghai, Hong Kong, Tokyo, Paris, Orlando, and Anaheim. Then Disney Cruise Line canceled all cruises after March 13 through April 12. Then film projects postponed their releases or canceled their production schedule. Then the movie theaters themselves closed disrupting theatrical runs already in progress.

While, yes projects still in pre-production can continue progress and Disney’s direct-to-consumer industry, lead by Disney+ find its time to shine, two of Disney’s biggest industries–tourism and film–have been grounded to a halt.

Credit: The Walt Disney Company

So, the Walt Disney Company has now filed for a debt offering totaling $5.89 billion.

According to the LA Times,

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

The debt offering comes one week after Disney closed its domestic theme parks, suspended cruise ship sailings and pulled a high-profile movie release. The company is shoring up its debt structure amid the cascading effect of the global pandemic, including heightened fears of a recession that could slow the Burbank entertainment giant’s recovery.

Disney, in its regulatory filings, said it planned to use proceeds from the sale for “general corporate purposes,” including restructuring existing debt, making acquisitions, buying back shares or investing in its various business units. But the company cautioned investors about the economic damage from the coronavirus.

In a Security Exchange Commission filing, Disney stated:

“The outbreak of the novel coronavirus … 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. We have closed our theme parks; suspended our cruises and theatrical shows; delayed theatrical distribution of films both domestically and internationally; and experienced supply chain disruption and ad sales impacts…

To counteract massive losses, Disney sold a number of bond notes that will be paid back with a certain level of interest at a certain point in the future. Those would-be bond were sold across the following tranches:

  • $1.75B in 3.35% notes due 2025
  • $500M in 3.7% notes due 2027
  • $1.25B in 3.8% notes due 2030
  • $750M in 4.625% notes due 2040
  • $1.75B in 4.7% notes due 2050

The sale of these notes allowed Disney to accumulate $5.98 Billion. The issuance is expected to be filed on Monday, March 23, 2020.

The size of the Walt Disney Company
Credit: TitleMax

While, it is clear Disney has taken a massive hit from the pandemic crisis, the exact reason for raising the money is still unknown. In times of economic uncertainty “Cash is King” and having this extra cash is no doubt helpful to ensure the company can continue to pay Cast Members while its Theme Parks are closed, offset declining viewership from ESPN with sporting events restricted and ensure they meet required debt payments from the $48 billion in debt on their books largely due to the acquisition of 20th Century Fox.

Disney has also taken other measures to stem the tide of this crisis by working on its direct-to-consumer platform. Frozen 2 is now available on Disney+ and Disney-Pixar’s Onward will be rushed onto the platform on April 3. Both Onward and Star Wars: The Rise of Skywalker were also rushed to digital release.

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