Disney Selling Bonds to Pay Down Fox Acquisition Debt

When the Walt Disney Co. acquired 20th Century Fox Film for $71 billion, it also assumed more than $13 billion of Fox’s outstanding debt.

Despite ongoing downsizing at Fox Studios and selloff of Fox’s regional sports TV networks, Disney Sept. 3 announced the commencement of an offering of one or more series of senior unsecured notes and fixed rate senior unsecured notes pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission.

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The new bonds are guaranteed by TWDC Enterprises 18 Corp., a subsidiary of Disney. 

Disney said it intends to use the net proceeds from the bond offering pay down previously existing notes related to the Fox acquisition, in addition to prepaying in full the aggregate principal amount outstanding under a “364-Day Credit Agreement,” dated as of March 15, 2019, which lists Disney as the borrower.

AT&T CFO: Corporate Tax Cut a Boon to Corporate Debt

To fiscal hawks, AT&T’s $85 billion acquisition of Time Warner heightened concerns regarding the telecom’s burgeoning corporate debt.

In an era of shrinking pay-TV households and industry consolidation, Wall Street hasn’t taken lightly to AT&T’s $183 billion debt through the third quarter (ended Sept. 30, 2018) following the acquisition.

The company’s stock was down more than 20% at the end of 2018 with a debt ratio of 2.8. The net debt to pre-tax earnings ratio indicates how many years it would take for a company to pay back its debt if net debt and pre-tax earnings are held constant.

Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts. AT&T has pledged to reduce its debt by $20 billion in 2019, at debt ratio to 2.5.

Speaking Jan. 9 at the Citi 2019 Global TMT West confab in Las Vegas, AT&T CFO John Stephens reiterated management’s vow to streamline debt through cost-cutting and asset sales — including its stake in Hulu.

Stephens also reminded analysts that with interest rates at historically low levels, combined with President Trump’s 40% cut to corporate tax rates, debt can be viewed from a different perspective.

“You lower your federal tax rate by 40%, it has an impact. And it’s real. And it’s economic. It’s cash,” Stephens said. “When you think about those two changes, I understand how people might have a differing view on leverage levels. We’re sticking to what we’ve told you and we’re really focused – laser focused on 2019 and getting it into that 2.5 range.”