03.23.20 - Walt Disney Co. is looking to sell $6 billion in bonds, to boost its cash reserves as it deals with the coronavirus-triggered economic crunch in multiple aspects of its business.
Disney disclosed the planned bond sales in a recent securities filing.
The entertainment giant is being hit probably harder than most of its rivals because of its diversification of physical assets and live entertainment dependent media assets beyond its media assets, with its theme parks closed, cruises curtailed and cancellation of major sports hurting its key profit engine ESPN. At the same time, Disney is investing heavily in its new streaming service Disney Plus. This move to go in heavy with streaming will ultimately pay off as a strong revenue positive digital asset to offset future liability with its physical media assets. Before Iger stepped down as CEO the company positioned itself to do just that. A move that will keep Disney competitive against New Gen streaming giants such as Netflix, Hulu, and Amazon.
Credit agency Moody’s last week said that Disney this year may not generate any cash, after capital expenditures, which would slow its plans to reduce debt. In the wake of Disney’s purchase of the Fox entertainment assets, Disney had $48 billion of debt at Dec. 31 offset by just $6.8 billion in cash.
Disney’s cash flow is under strain and it has issued a warning to its investors about its future performance in the wake of the crisis. It’s physical assets of cruise lines and theme parks will continue to be in the red for quarters to follow the inevitable recovery. It’s surprising that Disney held onto these assets rather than spin them off into a licensing business.
Analysts still remain upbeat about Disney’s future with a majority consensus issuing it as a strong buy. Shares slid over 9% in trading on Friday to $85.98 a share analysts see room for a potential 70% upside with a price target of $146.42 in the coming year.
Source: The Information, Yahoo Finance