News Disney and Fox come to terms -- announcement soon; huge IP acquisition

bartholomr4

Well-Known Member
Makes sense. That's the best use of that capital.

Do you know the amount of debt that Disney inherited from Fox?

Also they are getting around 14B in cash + unloading ~4B in debt from the RSNs + unloading opex costs from employees/pension/etc. Do I have it all right?
Yes,

It appears they acquired about 22.1 Billion in long-term debt from 21CF as of the Merger date (from the SEC). Old Disney had about $24 Billion at the time of the merger, for a total then of roughly $46 Billion. At the last earnings report, that total had fallen to $36.3 Billion. I think that total reflects a pay-down from the proceeds from SKY. So to get back to the pre-merger debt ration, we are looking at about $14 billion in debt pay down. I am not sure what the cost basis was for the Regional Sports Networks on their books, and if they have to declair a profit or can claim a loss on them. If there is a loss (I think they valued them over $20 billion in the proxy), there may be a tax benefit on the sale, which would make the number above larger.......

On the balance sheet Disney does list a Current Debt due (to be payed within a year) of $21.9 Billion. Its hard to tell what of this is operating or short-term debt and what is long term.... We can look at the next quarterly report to see what change has been made (in the $36.3 number) to tell if they are using the funds for debt reduction or other corporate purposes.....
 

AnotherDayAnotherDollar

Well-Known Member
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Yes,

It appears they acquired about 22.1 Billion in long-term debt from 21CF as of the Merger date (from the SEC). Old Disney had about $24 Billion at the time of the merger, for a total then of roughly $46 Billion. At the last earnings report, that total had fallen to $36.3 Billion. I think that total reflects a pay-down from the proceeds from SKY. So to get back to the pre-merger debt ration, we are looking at about $14 billion in debt pay down. I am not sure what the cost basis was for the Regional Sports Networks on their books, and if they have to declair a profit or can claim a loss on them. If there is a loss (I think they valued them over $20 billion in the proxy), there may be a tax benefit on the sale, which would make the number above larger.......

On the balance sheet Disney does list a Current Debt due (to be payed within a year) of $21.9 Billion. Its hard to tell what of this is operating or short-term debt and what is long term.... We can look at the next quarterly report to see what change has been made (in the $36.3 number) to tell if they are using the funds for debt reduction or other corporate purposes.....
Confused by the bolded. So if there is a loss of ~6B (i.e. if they valued at 20B and sold them for a total of 14B) and there is a tax benefit on the sale, why would the amount of debt they have to pay down be larger? Wouldn't the 6B be a benefit in taxes and they could write that off over the coming years?
 

bartholomr4

Well-Known Member
Confused by the bolded. So if there is a loss of ~6B (i.e. if they valued at 20B and sold them for a total of 14B) and there is a tax benefit on the sale, why would the amount of debt they have to pay down be larger? Wouldn't the 6B be a benefit in taxes and they could write that off over the coming years?
Yes, that is what I tried to say somewhat clumsily.... The $6 billion dollar loss would result in a tax benefit of their Federal Tax Rate time $6 Billion or somewhere between $1.3 to $1.8 billion (I am not sure of their tax rate) in reduction in taxes they wouldn’t have to pay, which would get the total cash proceeds from the sale close to $20 Billion (give or take).... to your point the benefit may take a couple of years to fully show up
 

AnotherDayAnotherDollar

Well-Known Member
Yes, that is what I tried to say somewhat clumsily.... The $6 billion dollar loss would result in a tax benefit of their Federal Tax Rate time $6 Billion or somewhere between $1.3 to $1.8 billion (I am not sure of their tax rate) in reduction in taxes they wouldn’t have to pay, which would get the total cash proceeds from the sale close to $20 Billion (give or take).... to your point the benefit may take a couple of years to fully show up
6 billion dolalr loss times 6 billion?

Other than that it makes sense. What else do they still need to divest? Fox Sports Brazil and Fox Sports Mexico. Is that the only outstanding item? I think they have until the end of 2020 to sell that.
 

AnotherDayAnotherDollar

Well-Known Member
From a regulatory legal perspective, that is all that remains.
Any rumors or estimates how much those are worth?

Given your numbers above and assuming no tax benefit and that they put everything to pay down debt, then Disney would be about 22B in debt, which is lower than pre Fox acquisition. That seems faster than the guidance McCarthy gave, so I am not sure they'll use everything to pay down debt.
 

seascape

Well-Known Member
Any rumors or estimates how much those are worth?

Given your numbers above and assuming no tax benefit and that they put everything to pay down debt, then Disney would be about 22B in debt, which is lower than pre Fox acquisition. That seems faster than the guidance McCarthy gave, so I am not sure they'll use everything to pay down debt.
They would not have used all the cash from the sale of Sky and the RSNs to pay off debt. They allso were borrow to build up shows for Disney plus and Hulu. Hulu's debt BTW is now fully on Disney's books as theyvare the sole source of the loses and the purchase price has been set.
 

bartholomr4

Well-Known Member
They would not have used all the cash from the sale of Sky and the RSNs to pay off debt. They allso were borrow to build up shows for Disney plus and Hulu. Hulu's debt BTW is now fully on Disney's books as theyvare the sole source of the loses and the purchase price has been set.
I agree. With the expanding investment in Hulu, total debt will not drop to the level it would have.

It may be semantics, but Comcast can continue to fund its portion of the debt to maintain their equity position. They also can choose not to, but if they don't, Disney's % ownership in Hulu goes up accordingly (i.e. there is a corresponding increase in the asset value on Disney's balance sheet). We will know if Comcast is continuing to invest when their earnings come out each quarter.

As for the price of the of the Latin American assets Disney promised to sell, the agreement is foggy, and I haven't heard what the value of the properties would be. The sales agreement gives Disney 2 years from the 21CF closing date to resolve the sale, so we may not know for awhile.....
 

bartholomr4

Well-Known Member
Yes,

It appears they acquired about 22.1 Billion in long-term debt from 21CF as of the Merger date (from the SEC). Old Disney had about $24 Billion at the time of the merger, for a total then of roughly $46 Billion. At the last earnings report, that total had fallen to $36.3 Billion. I think that total reflects a pay-down from the proceeds from SKY. So to get back to the pre-merger debt ration, we are looking at about $14 billion in debt pay down. I am not sure what the cost basis was for the Regional Sports Networks on their books, and if they have to declare a profit or can claim a loss on them. If there is a loss (I think they valued them over $20 billion in the proxy), there may be a tax benefit on the sale, which would make the number above larger.......

On the balance sheet Disney does list a Current Debt due (to be payed within a year) of $21.9 Billion. Its hard to tell what of this is operating or short-term debt and what is long term.... We can look at the next quarterly report to see what change has been made (in the $36.3 number) to tell if they are using the funds for debt reduction or other corporate purposes.....
Disney filed a report today with the SEC, related to the sale of the Fox Networks. The YES Network sale closed today. In the report Disney detailed a total receipt of 11.7 billion in cash for the sale of all of the Fox Networks, and the transfer of 4.4 Billion in debt, with the net sale value of $16.1 Billion. Based on the cost of the assets on the books, Disney will pay $1.7 Billion in taxes on the transaction. Apparently Disney retained $1.8 billion in cash from the Fox Networks.
 

seascape

Well-Known Member
Disney filed a report today with the SEC, related to the sale of the Fox Networks. The YES Network sale closed today. In the report Disney detailed a total receipt of 11.7 billion in cash for the sale of all of the Fox Networks, and the transfer of 4.4 Billion in debt, with the net sale value of $16.1 Billion. Based on the cost of the assets on the books, Disney will pay $1.7 Billion in taxes on the transaction. Apparently Disney retained $1.8 billion in cash from the Fox Networks.
For what its worth, 11.7 billion minus 1.7 leaves 10 billion in cash. Then deducting 4.4 billion in debt that went with the RSNs should allow them to reduce the debt to 21.9 billion. (Note, I used your numbers from above.) Now, I am sure they added some for the production and start up costs for Disney Plus and the severance pay for those who lost their jobs. In any case Disney's future is very bright.
 

bartholomr4

Well-Known Member
Per a posting yesterday and today on SEC.gov, Disney went to the bond market and borrowed about $7 billion in debt and made an offer to repurchase (pay-off) any and all outstanding 21CF debt. This appears to be a swap of low interest rate notes for higher interest rate notes and may or may not reduce the overall debt level at Disney. Disney can go back to the market again (to borrow more money) if they have a large number of current bond holders ready to sell their 21CF debt. The tender offer (repurchase offer) is good until September 30th.

We won't know if this is just a swap, or if Disney is using some of the cash from the sale of the Fox Sports Networks to also reduce a portion of the outstanding debt. We will know more as they report the outcome on SEC.gov
 

bartholomr4

Well-Known Member
Disney Announced the tender was oversubscribed and increased the amount of debt they are re-purchasing by $2.25 billion. There is a mixture of Disney and 21CF debt being reduced as a result of the repurchase by $4.2 billion. Disney is performing an early closing today on these bonds. The tender for additional bonds continues until September 30th.
 

bartholomr4

Well-Known Member
Disney registered today with the SEC an Exchange offer for the remaining 21CF debt to convert those bonds to Disney bonds. The exchange amount is for over $14 Billion in bonds which mature from August 2020 to October of 2096. Within the filing Disney confirms the completion of the tender offer (discussed above) on October 3rd. These bonds represent bonds which the current holders did not want to sell back to Disney, or Disney did not (or can't yet) attempt to repurchase.

Based on this effort (and complexity) it appears Disney is going to maintain this level of 21CF debt in the short term, and any further tenders are not likely. The purpose of the exchange is to make the bonds more liquid (so current owners can trade them on the bond market) and for the bonds to hold the Disney name.

The balances will naturally decline as the bonds (there are 37 different maturity dates) mature. For example Disney must pay off $300 million in the first maturity next August and about $2 billion in principle over the next two years.
 

brodie999

Active Member
Huh I thought they had till late 2020 to sell Fox Sports Brazil?
Don't worry. Someone on Reddit posted this is just a dispute over a sports asset not being sold on a specific date. This means the merger won't be undone and this has nothing to do with and has no effect on Marvel.
 

Rodan75

Well-Known Member
Don't worry. Someone on Reddit posted this is just a dispute over a sports asset not being sold on a specific date. This means the merger won't be undone and this has nothing to do with and has no effect on Marvel.
It is...but I suspect that Disney is going to try and keep the assets both in Brazil and MX and come up with another way of appeasing both regulators.
 

bartholomr4

Well-Known Member
It is...but I suspect that Disney is going to try and keep the assets both in Brazil and MX and come up with another way of appeasing both regulators.
I totally agree. The alternative is Brazil and Mexico finding someone to buy the business for Disney, which is unlikely. Brazil had two potential buyers and neither could execute the deals. I think if Disney guarrantee's access to the networks at a reasonable price (i.e. free with advertising so to speak), the issue goes away ( and Disney ends up keeping the assets).

The Cade appears to have 4 openings on the commission. There doesn't appear to be a rush to fill the roles, and once nominated, the candidates have to be approved by the legislature. Just don't think the Gov't in Brazil can or is interested in this condition now.
 
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