S&P Global Ratings placed Walt Disney’s Co.’s A-plus rating on CreditWatch negative Thursday, meaning it could downgrade the issuer in the near term. The move came after Disney said it was acquiring assets from 21st Century Fox Inc. for about $66 billion. The deal is expected to boost Disney’s business and help it achieve strategic goals of improving its direct to consumer offerings and beefing up an already robust set of franchises, with additions such as X-Men, Fantastic Four and Avatar, as well as TV shows and sports programming, said S&P. “However, the acquisition will also likely increase adjusted leverage to the mid- to high-2x area depending on the final set of assets acquired, which will be well above our current 2x downside threshold for the rating,” said S&P. “The CreditWatch placement reflects the uncertainty regarding the final terms and structure associated with Disney’s acquisition of a portion of Fox’s assets and the potential for some regulatory concessions that may be required to complete the deal.” Disney’s 2.950% notes that mature in June of 2027 were last trading at 99.385 cents on the dollar to yield 3.0255, or at a yield spread of 66 basis points over Treasurys, according to MarketAxess. The bonds were trading at 100.074 cents on the dollar on December 2, when the first reports that Disney and Fox were in talks emerged. The stock was down 0.1%, and has gained 20% in 2017, while the S&P 500 has gained 18% and the Dow Jones Industrial Average has gained 24%.
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