Business Context and Reporting Period
The Walt Disney Company filed this Form 8-K on March 7, 2023, reporting an event occurring March 3, 2023. The filing concerns the replacement of Disney’s unsecured 364-day revolving credit facility and does not report quarterly or annual operating results.
Financing and Liquidity
| Item | Details |
|---|---|
| Facility size | $5.25 billion aggregate principal amount |
| Purpose | Support commercial paper borrowings and other general corporate purposes |
| Maturity | March 1, 2024 |
| Extension option | Disney may extend the maturity of all or part of outstanding advances to February 28, 2025 |
| Security | Unsecured |
| Guarantee | TWDC Enterprises 18 Corp. guarantees Disney’s payment obligations, subject to release in specified circumstances |
| Financial covenant | Minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 3.00 to 1.00, measured as of the last day of each four-quarter period |
Interest rates are based on the applicable benchmark for the borrowing currency plus a spread of 0.625% to 1.000%, determined by Disney’s public debt rating. Dollar Base Rate Advances carry the Base Rate plus a 0.000% spread. The filing does not state the amount drawn or outstanding under the facility.
Material Changes Versus Prior Period
The new agreement replaces Disney’s prior $5.25 billion 364-day credit agreement dated March 4, 2022. The filing describes the new facility as having substantially similar purposes, covenant requirements and default provisions, but does not quantify other material changes.
Terms, Risks and Contingencies
- Advances may generally be prepaid without penalty or premium, except for customary breakage costs associated with certain benchmark-rate borrowings.
- The agreement includes customary affirmative and negative covenants, information and reporting requirements, limitations on mergers, and compliance obligations.
- Events of default include payment failures, covenant breaches, material misrepresentations, defaults on other material indebtedness, bankruptcy-related events, material judgments and failure of the guarantee to remain effective where required.
- Upon an event of default, lenders may declare amounts owed immediately due and payable.
- The agreement includes a mechanism to replace an interest-rate benchmark if it is no longer available.
- Certain entities related to Hong Kong Disneyland and Shanghai Disney Resort are excluded from specified representations, covenants and events of default.
Most Important Facts to Verify
- Whether Disney has drawn on the facility and the amount of any outstanding borrowings.
- Disney’s compliance with the 3.00-to-1.00 minimum interest coverage covenant.
- The applicable interest-rate spread based on Disney’s current public debt ratings.
- Whether the facility is extended, refinanced or replaced before its March 1, 2024 maturity.
- The complete terms of the Credit Agreement filed as Exhibit 10.1.