Business Context and Reporting Period
The Walt Disney Company filed this Form 8-K under Item 8.01 on March 6, 2020, with the report signed on March 11, 2020. The filing reports new revolving credit facilities supporting commercial paper borrowings and general corporate purposes. It does not present quarterly or annual operating results.
Key Financial and Liquidity Matters
- New 364-day facility: $5.25 billion, expiring March 5, 2021. The borrower may elect to extend the maturity of all or part of outstanding advances for one year.
- New five-year facility: $3.0 billion, expiring March 6, 2025.
- Both facilities support commercial paper borrowings and are available for other general corporate purposes.
- Borrowings may bear interest at LIBOR-based rates, or a replacement rate if LIBOR is unavailable, plus a spread that varies with Disney’s debt rating and applicable credit default swap spread.
- The facilities contain one financial covenant relating to interest coverage.
- The filing does not provide amounts outstanding, commercial paper balances, interest expense, liquidity balances, revenue, profit, cash flow, margins, or debt ratios as of the filing date.
Material Changes Versus Prior Facilities
- The $5.25 billion 364-day facility replaces a $6.0 billion 364-day facility scheduled to expire March 6, 2020.
- The $3.0 billion five-year facility replaces a $2.25 billion facility scheduled to expire March 11, 2021.
- Combined committed capacity increased from $8.25 billion to $8.25 billion, although the maturity profile and individual facility sizes changed.
- The new agreements reflect Disney’s March 20, 2019 acquisition of Twenty-First Century Fox, Inc., subsequently renamed TFCF Corporation, and the related corporate restructuring.
- Terms, representations, covenants, and events of default are substantially similar to the former facilities, with modifications related to the acquisition and restructuring.
Outlook, Covenants, and Risks
- TWDC Enterprises guarantees Disney’s payment obligations under both facilities; the guarantees may be released upon specified circumstances.
- The facilities include customary representations, warranties, covenants, and events of default, with an interest-coverage financial covenant.
- Hong Kong Disneyland and Shanghai Disney Resort are excluded from certain representations, covenants, and events of default.
- Variable-rate borrowing exposes Disney to changes in benchmark rates, while pricing also varies with its debt rating and related credit market measures.
- The filing provides no management earnings guidance, operating outlook, contingency assessment, or discussion of the potential effects of the COVID-19 pandemic.
Important Facts to Verify
- Actual borrowings and available capacity under each credit agreement.
- Disney’s commercial paper balance and other short-term liquidity needs.
- Compliance with the interest-coverage covenant and any applicable events of default.
- The interest-rate spread, benchmark replacement provisions, and effect of any credit-rating changes.
- The detailed guarantee-release conditions and other terms in Exhibits 10.1 and 10.2.