8-KOther EventsExhibits & Filings

Walt Disney Co 8-K Report, Corporate Update (Mar 8, 2021)

Filed March 8, 2021For Securities:DIS

Summary

The Walt Disney Company (DIS) announced on March 5, 2021, the execution of a new 364-day Credit Agreement, replacing a similar agreement from March 2020. This new facility provides access to up to $5.25 billion in borrowings, primarily supporting the company's commercial paper program and general corporate needs. The agreement is unsecured and guaranteed by TWDC Enterprises 18 Corp., with the guarantee subject to release under specific conditions. This refinancing maintains the company's access to significant liquidity on terms largely consistent with the previous agreement. The interest rate spreads are tied to Disney's public debt rating, offering flexibility. Investors should note the agreement's maturity on March 4, 2022, with an option for a one-year extension. While the covenants are standard for such agreements, the key financial covenant requires a minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 3.00 to 1.00, a metric investors should monitor.

Key Highlights

  • 1Disney entered into a new $5.25 billion 364-day Credit Agreement on March 5, 2021.
  • 2The new agreement replaces a similar $5.25 billion facility from March 2020.
  • 3The credit facility is unsecured and includes a guarantee from TWDC Enterprises 18 Corp.
  • 4The agreement supports commercial paper borrowings and general corporate purposes.
  • 5Interest rates are variable, based on Disney's public debt rating, ranging from 0.000% to 1.125% depending on the borrowing type (Base Rate or Eurocurrency Rate).
  • 6The credit agreement matures on March 4, 2022, with an option to extend the maturity date to March 3, 2023.
  • 7A key financial covenant requires a minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 3.00 to 1.00.

Frequently Asked Questions

The new 364-day Credit Agreement provides The Walt Disney Company with access to up to $5.25 billion in borrowings. Its primary purpose is to support the company's commercial paper program and to be available for other general corporate purposes. It replaces a similar credit facility that was set to expire.

The agreement is for $5.25 billion, matures on March 4, 2022, and is unsecured, guaranteed by TWDC Enterprises 18 Corp. Interest rates are tied to Disney's public debt rating. It includes customary covenants, such as financial statement delivery and limitations on mergers, and requires a minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 3.00 to 1.00. The company has an option to extend the maturity by one year.

No, this filing does not necessarily indicate financial distress. Refinancing credit lines is a common and prudent practice for large corporations to ensure access to liquidity and manage their funding costs. The agreement is substantially similar to the previous one and maintains the same aggregate principal amount, suggesting a routine liquidity management action rather than a response to immediate financial concerns.

This covenant is a key measure of the company's ability to service its debt obligations. A ratio of 3.00 to 1.00 means that the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) must be at least three times its interest expenses. Maintaining this ratio is crucial to avoid default under the credit agreement, and investors often track it as an indicator of the company's financial health and leverage.