Fitch Downgrades Disney’s Debt

Fitch Ratings on Monday downgraded its rating on Walt Disney Co., citing the company’s debt, the struggling ABC television network and the falloff in the company’s theme park business.

Fitch cut its rating on Disney’s unsecured debt from A-minus to BBB-plus, Fitch’s third-lowest investment grade. The lowering affects about $14 billion in debt.

The action could marginally raise Disney’s borrowing costs by increasing the interest rates the company pays on its debt, analysts said. The move brought little reaction on Wall Street, with Disney’s stock falling 16 cents to $16.67 on the New York Stock Exchange.

The rating firm cited the firm’s higher debt from the $5.2-billion acquisition of the Fox Family Worldwide cable business in October and “the declining operating performance of Disney’s businesses.”

Fitch pointed to the continued ratings slide at ABC, a mixed record at the box office and declines in the company’s theme park business because of the recession and the effects of Sept. 11. Fitch credited Disney’s management, however, for making strides in reducing its expenditures, which are declining to $1.25 billion in fiscal 2002 from $1.8 billion in fiscal 2001.

“We have worked to reduce sharply our debt levels this year, and we are comfortable with our ability to handle our obligations and confident in the overall strength of our balance sheet and our liquidity,” Disney spokesman John Spelich said.

Disney sees the Fitch action “as the result of short-term business conditions. We remain optimistic about the long-term prospects for the Walt Disney Co.,” Spelich said.

Despite the downgrade, the company’s overall balance sheet remains healthy, said Jeffrey Logsdon, an analyst with Gerard Klauer Mattison.

Moody’s Investors Service and Standard & Poor’s Ratings Services also have signaled that they may lower their ratings on Disney’s senior debt.