Proceeds will be used for general corporate purposes including repayment of debt and commercial paper (CP). Outstanding CP totaled
KEY RATING DRIVERS
--Fitch believes Disney has the financial flexibility and capacity at the current rating level to accommodate a higher level of share repurchases during its fiscal year 2014 in a manner neutral to its credit profile.
--The ratings incorporate Fitch's expectation that the company's share repurchase and M&A activity will likely exceed free cash flow (FCF) generation.
--Disney is uniquely positioned to capitalize and monetize franchises and brands across the company's various business segments and platforms, providing Disney with a sustainable competitive advantage relative to its peers.
--Disney is well-positioned to address the secular threats and opportunities presented by emerging alternative distribution platforms and continued audience fragmentation across the media and entertainment landscape.
Disney's capital structure and credit protection metrics remain consistent and within Fitch's expectations for the current rating. Consolidated leverage of 1.16x as of the LTM period ended
Fitch does not anticipate any meaningful changes to Disney's financial policy as the company increases the level of share repurchases during fiscal 2014 to range between
Disney's operating profile positions it to generate meaningful levels of FCF (defined as cash flow from operations less capital expenditures and dividends), providing the company with considerable financial flexibility at the current ratings. Disney generated approximately
Overall, the ratings reflect the company's leading market positions within its core businesses. Further, Disney has a very consistent investment strategy that is centered on creating or acquiring intellectual property and content that is leverageable across Disney's various platforms (cable and broadcast network, studio, parks and resorts, and consumer products). Disney is uniquely positioned, relative to its peers to capitalize and monetize its internally or externally developed franchises and brands, which in turn strengthens Disney's operating and credit profile and provides the company with a sustainable competitive advantage.
Disney's strong portfolio of cable networks underlines the company's ratings, and its operating profile continues to benefit from the stable, recurring dual-stream revenue profile and high operating margin characteristics attributable to its cable network business. Disney's cable networks generate a greater portion of total revenue and EBITDA, resulting in incremental stability in the total revenue and FCF profile. Rising programming costs, particularly sports programming, and Disney's ability to pass the higher costs along to multi-channel video programming distributors (MPVDs) will remain a significant risk to the company's operating profile. However, Fitch believes that Disney is in a strong position to retain pricing power going forward as its collection of top-tier cable networks continue to command audience and ratings and be a must-carry for the MVPDs. In addition, Disney has in large part successfully matched the tenor of its long-term sports programming rights with the terms of its various affiliation agreements with the MVPDs.
Ratings incorporate the cyclicality of the company's businesses, particularly
Disney is well-positioned to address the secular threats and opportunities presented by emerging alternative distribution platforms and continued audience fragmentation across the media and entertainment landscape. Fitch expects alternative distribution platforms to generate incremental demand for high-quality content across all major end-markets (broadcast, cable networks and subscription video on demand) and large, well-capitalized content providers, such as Disney, to remain crucial to the industry.
Disney's liquidity position and financial flexibility remain strong and are supported by significant FCF generation as well as
Positive: Upward momentum to the ratings is unlikely over the intermediate term. However, a compelling rationale for, and an explicit public commitment to, more conservative leverage thresholds could result in upgrade consideration.
Negative: Negative rating actions are more likely to coincide with discretional actions of Disney's management rather than by operating performance, reflecting the company's significant financial flexibility. Decisions that increase leverage beyond 1.75x in the absence of a credible plan to reduce leverage will likely lead to a negative rating action.
Total debt at
Fitch currently rates Disney as follows:
The Walt Disney Company
--Issuer Default Rating (IDR) at 'A';
--Senior unsecured debt at 'A';
--Short-term IDR at 'F1';
--Commercial paper at 'F1'.
--IDR at 'A';
--Senior unsecured debt at 'A'.
--IDR at 'A';
--Senior unsecured debt at 'A'.
Fitch links the IDRs of the issuing entities (predominantly based on the lack of any material restrictions on movements of cash between the entities) and treats the unsecured debt of the entire company as pari passu. Fitch recognizes the absence of upstream guarantees from the operating assets and that debt at
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Source: Fitch Ratings
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