8-KOther EventsExhibits & Filings

Walt Disney Co 8-K Report, Corporate Update (Apr 13, 2020)

Filed April 13, 2020For Securities:DIS

Summary

The Walt Disney Company (DIS) filed an 8-K on April 12, 2020, reporting the execution of a new 364-Day Credit Agreement on April 10, 2020. This agreement provides the Company with access to up to $5 billion in unsecured financing for general corporate purposes. The facility includes a guarantee from TWDC Enterprises 18 Corp. and has a maturity date of April 9, 2021, with an option for a one-year extension. This new credit facility is similar to a prior one entered into in March 2020, with slight adjustments to interest rate spreads and commitment fees. The agreement contains standard covenants regarding financial reporting, compliance, and limitations on mergers, along with a financial maintenance covenant requiring a minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 3.00 to 1.00. The filing also details customary default provisions and remedies.

Key Highlights

  • 1Disney secured a $5 billion unsecured 364-day credit facility to be used for general corporate purposes.
  • 2The credit agreement matures on April 9, 2021, with an option to extend for another 364 days.
  • 3TWDC Enterprises 18 Corp. provides a guarantee for the credit facility.
  • 4Interest rates on borrowings vary based on Disney's public debt rating, ranging from 0.000% to 1.500% depending on the rate type (Base Rate or Eurocurrency Rate).
  • 5The agreement includes customary covenants, such as financial statement delivery and limitations on mergers.
  • 6A key financial covenant requires a minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 3.00 to 1.00.
  • 7The facility contains standard default provisions, including events related to payment failures, covenant breaches, and bankruptcy.

Frequently Asked Questions

Disney entered into this $5 billion credit agreement to ensure access to liquidity for general corporate purposes. Given the economic uncertainties at the time (April 2020), securing financing provides flexibility and a financial cushion.

TWDC Enterprises 18 Corp. acts as a guarantor, meaning it pledges to cover Disney's payment obligations under the credit agreement if Disney itself is unable to do so. This provides additional security to the lenders.

A primary financial condition is the requirement to maintain a minimum ratio of Consolidated EBITDA to Consolidated Interest Expense of 3.00 to 1.00, measured at the end of each fiscal quarter. This ensures the company generates sufficient earnings to cover its interest payments.

This 364-day credit agreement is substantially similar to a previous one entered into in March 2020. The primary differences lie in the applicable interest rate spreads and commitment fees, which are adjusted based on current market conditions and Disney's credit profile.