Disney has been slapped with its third credit downgrade this autumn, increasing pressure to sell assets such as its World Series contender, the Angels.
Moody’s yesterday added the third credit humiliation on the entertainment giant by saying its slipping popularity is seriously hurting the bottom line. Moody’s cited the decline in attendance at its theme parks and shrinking viewership and advertising on its ABC TV network, which might hurt profits.
Moody’s cut Disney’s senior unsecured debt rating one notch to “Baa1,” its third lowest investment grade, from “A3.” Two other credit rating agencies, Standard & Poor’s Ratings Services and Fitch Ratings, have downgraded Disney the past two months.
The downgrades mean that Disney will have to pay higher interest for its borrowings. Disney currently is trying to get rid of its $14 billion debt load.
Glenn Eckert, a Moody’s vice president, said Disney’s finances are weak and that Disney chief Michael Eisner may have to sell some of its assets to keep the financial world happy.
Eckert said Eisner is always studying what assets he may have to sell and that “if the economy or the travel environment is shocked again, Disney may need to sell assets and undergo more aggressive cost cutting.”
Eckert said Disney has a strong brand inventory and movie library, and an “enviable collection of trademarks, especially in children’s entertainment.”
Disney shares closed unchanged yesterday at $16.75. They’ve fallen 19 percent this year.
Some analysts aren’t surprised by the latest downgrade.
Chris Dixon of UBS Warburg said Disney got in deep debt from its $5.2 billion purchase of the Fox Family Channel.