S&P may downgrade Disney

After hearing Disney (N:DIS) executives lower their expectations for 2003 (3/20 RBR Daily Epaper #56), Standard & Poor's placed the company's BBB+ long-term corporate credit rating on its CreditWatch list with "negative" implications. S&P indicated that the downgrade potential was limited to one notch - - to the BBB level. Disney's other credit ratings were not affected.

"The company has acknowledged that it will likely miss its earnings target of 25% to 35% growth for the year ending September 30, which will likely translate into less debt reduction than we had been relying on in maintaining the rating," said S&P credit analyst Heather Goodchild. "Credit measures have been subpar for the rating since October 2002, but we had been closely watching the company's progress through a gradual business pickup."

S&P said that although theme park attendance had begun to rebound in the fiscal quarter that ended 12/31/02, it has softened again as international tensions have mounted - - and at a time when the company's high-attendance spring break season approaches.

"Furthermore, the ABC Television Network, the ABC owned and operated TV stations, and the ABC radio group, which had been experiencing rebounding advertising demand, now risk belt-tightening by advertisers, particularly during programs covering the conflict. The TV and radio stations' high margins magnify the effect of any revenue weakness," S&P said.