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Disney's Credit Rating Lowered


In another setback for Walt Disney Co., Moody's Investors Service Inc. lowered the company's credit rating for the first time in five years.

Moody's downgraded Disney's senior unsecured debt rating to A3 from A2 and its short-term debt rating to P-2 from P-1. About $12 billion of debt is affected.

Downgrades typically raise borrowing costs. The short-term downgrade could make it tougher for Disney to sell commercial paper.

Moody's cited concerns about debt from Disney's $5.3-billion acquisition of Fox Family Worldwide and the company's recent stock buybacks. Disney recently sold $1 billion of bonds, using some proceeds to buy back stock from Texas billionaires Sid and Lee Bass last week.

Share repurchases were intended to bolster Disney's stock price, which has plummeted nearly 20% since the terrorist attacks.

Moody's also said it was concerned about the long-term economic effects of the attacks on the company's theme parks and ABC television network. Disney lost several million dollars in ad revenue due to round-the-clock ABC news coverage, while theme park attendance has tumbled.

Moody's added that Disney's brand remains "unrivaled in children's and family entertainment."

Disney spokesman John Dreyer said, "We continue to remain confident in the strength and flexibility of our balance sheet."

The downgrades will slightly raise Disney's borrowing costs but not enough to affect its bottom line or hurt its borrowing power, analysts said.

"I don't think institutional investors and analysts are going to pay much attention to this," said Jeffrey Logsdon an analyst with Gerard Klauer Mattison.

Disney was up 11 cents to $17.55 on the New York Stock Exchange.

On a more positive note for Disney, the company got a lift Thursday when President Bush urged Americans to resume travel and vacation plans, including visits to Walt Disney World.

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