TrainsOfDisney
Well-Known Member
Faced with bankruptcy and going bankrupt are 2 different things. I wouldn’t have said it so snippy but we’ve been over this on this thread.
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What's Still On and What's Now Off
- Thread starter WDW Pro
- Start date
Faced with bankruptcy and going bankrupt are 2 different things. I wouldn’t have said it so snippy but we’ve been over this on this thread.
If we get to September and Disney still can't open any of their parks, play any movies in theaters, or get any sports on their networks... then in that situation, the economy is also likely in dire straits. Could they be faced with bankruptcy at that point to try to restructure? Sure.
Now, do I believe that will happen? No. Why?
- I feel optimistic that we will find medical interventions (chloroquine looking especially promising).
- Governments may bail out Disney.
- Disney could attempt to sell assets in mass.
However, this all comes down to when we find and approve a medical intervention that works. Every day that we don't have a medicine to treat this virus, the pain to the global economy is exponentially greater. All of us should be praying that we find a drug that works. Disney won't be much of a place to go to if all of us are in an economic depression.
Chef Mickey
Well-Known Member
Are you basing this on any of their real financials and have you done modeling to understand the potential loss, cost savings due to ceased operations, cash, credit markets for short term loans, and potential debt re-structure?
I mean, throwing something like bankruptcy out there should be met with some meat behind it...not just, "things will be really bad if they can't operate parks, movies, and sports....so bankruptcy is on the table in September."
I mean, maybe it is...but I think you have to have some logic to get there.
I don't see Disney selling anything in mass or getting bailed out.
I see a several billion dollar hit they can weather and a lot of cost cutting if things get really bad. Disney has a strong credit profile should they need to borrow some money to get them through this.
I suppose if things don't improve for literally years, things may change. September and we are already talking about bankruptcy contingency plans? I don't think so.
UNCgolf
Well-Known Member
Based on their revenue breakdown from last year, I think they could lose roughly 50% of their yearly revenue (and maybe more) if parks, movie theaters, etc. were all shut down until September.
That doesn't tell the whole story, of course. As you mentioned, they'd also have significantly lower expenses, so it's not like they'd suddenly be 40 billion in the red. Everything would probably have to be shut down for the whole rest of the year before they were near a Chapter 11 situation.
DDLand
Well-Known Member
From posts like these with the two interacting, I’d say not at all.
Insider info/ AMA on WDW's 50th Ann.
Listen Bob, I’ve got a great idea! Use the screens in SSE as marketing and for the guests to access the Shop Disney App! What’s sad is I think you’re being serious 🤯
I’d also say I’m fairly certain @MouseBrayden and @Disnerd2003 are NOT the same person. Though that has been litigated to death, and this is the wrong thread for that.
Chef Mickey
Well-Known Member
Losing the revenue is going to happen. That doesn't mean they are burning through cash because I can guarantee you they'll lay people off after April 18th if there is no clear date of re-open, unfortunately.
You're exactly right on your second statement, but the last statement is just a guess I assume?
I don't know if anyone (but Disney) has the detail on how long a total closure can be sustained before Chapter 11 or any bankruptcy. They will not just give up the company that easily. They will borrow money, sell assets, and do whatever they have to do to avoid that.
UNCgolf
Well-Known Member
The last statement wasn't even really a guess -- I was saying I thought everything would have to be closed for the rest of the year before that even became a remote possibility; not that everything being closed for the year would mean they'd have to file for Chapter 11.
Based on their 10-k, a couple years. They have a lot of assets that are not leveraged.
Disney's been dropping about $4B a year in capex. Half of that toward repair, maintenance, upgrade, refurb. The other half in new stuff (for all parks and cruise lines and adventures and merch).
Disney could cut back on those for a full year or more (like the many years after the Great Recession when there was almost no capex expenditures).
You save $4B here, some $4B there, and soon you're talking real money.
Disney could cut back on those for a full year or more (like the many years after the Great Recession when there was almost no capex expenditures).
You save $4B here, some $4B there, and soon you're talking real money.
DDLand
Well-Known Member
What’s clear is Disney has lots of financial obligations, and not tons of cash on hand. Disney’s future is looking increasingly tied to its ability to raise capital. With the work of the Federal Reserve and stimulus package, capital markets should be in pretty good shape in the short term. But...
@WDW Pro said if it went through the summer, they could be looking at bankruptcy. What if it does go through summer? Things are crazy right now. Stimulus measures may not play out in the intended way, because people will be too fearful to shop or participate in transactions. Businesses can’t run on perpetual losses and government infusions of cash. The goal of bailouts has always been to keep producers in the marketplace, because they have underlying value that is clouded by short term obligations. But this stimulus isn’t keeping producers in the marketplace- there is no marketplace! COVID-19 has smothered the life out of economic interactions everywhere.
Walt Disney World and it’s entire supply chain have been shuttered. That sends reverberations through thousands of workers globally. For example, now Disney isn’t buying refillable mugs from a factory in China. Not a big deal right? Well consider this highly simplified series of interactions...
Suppose the factory manager (and thousands of other middle class individuals who fit this description) in China panics and tries to save money. That means thousands of people don’t buy iPhones. Apple notices a drop in China, and decides to hire fewer developers here in the US. With fewer developers, fewer people buy refrigerators. The refrigerator salespeople of the world who would have gone on a trip to Walt Disney World can no longer afford to go. The cycle repeats itself getting more and more destructive.
Our entire economy is based on a fragile series of interactions. You shut down one segment of the economy, and it will flow towards others. Coronavirus is like an Earthquake that hit off the coast of a major city. The Earthquake is really bad, but after a few scary minutes people start to get their bearings. Short-term shutdowns and lost interactions are bad, but we don’t panic. Little do people know the earthquake has created a massive Tsunami barreling at the city. The Earthquake already had strained resources, and now the Tsunami levels everything. If corona stays bad, we’re post earthquake pre tsunami. This could get really really bad.
Or it might not and everything will be good. But let’s not kid ourselves about this, I’m decidedly with @WDW Pro. Every day this goes on, the more and more possible this will leave carnage. Disney has tens of billions of dollars in contractual obligations over the next two years. They’ve probably burned through hundreds of millions since this started. There’s a good chance Hong Kong Disneyland and Shanghai Disneyland default on debt and need restructuring wiping out hundreds of millions on the balance sheet. The dearth of ESPN content may speed cord cutting. Disney+ is a stunningly good business, but still just a sapling that can’t bear fruit. I could go on. It’s bad.
If Disney is going to go bankrupt, it will be within a broader economic collapse that will leave you not very worried about Disney. Like 2009 will look like some minor turbulence.
Is this the most likely scenario? No. But think back two months ago. Was what happened with Corona the most likely scenario? I’d say your naive and ignorant January self would be horrified at what has happened.
Not trying to be scary, but @WDW Pro is roughly consistent with the type of fear I would expect to be gripping Burbank right now...
Of course, I’m just a guy on the internet. So... Grain of salt anyone?
@WDW Pro said if it went through the summer, they could be looking at bankruptcy. What if it does go through summer? Things are crazy right now. Stimulus measures may not play out in the intended way, because people will be too fearful to shop or participate in transactions. Businesses can’t run on perpetual losses and government infusions of cash. The goal of bailouts has always been to keep producers in the marketplace, because they have underlying value that is clouded by short term obligations. But this stimulus isn’t keeping producers in the marketplace- there is no marketplace! COVID-19 has smothered the life out of economic interactions everywhere.
Walt Disney World and it’s entire supply chain have been shuttered. That sends reverberations through thousands of workers globally. For example, now Disney isn’t buying refillable mugs from a factory in China. Not a big deal right? Well consider this highly simplified series of interactions...
Suppose the factory manager (and thousands of other middle class individuals who fit this description) in China panics and tries to save money. That means thousands of people don’t buy iPhones. Apple notices a drop in China, and decides to hire fewer developers here in the US. With fewer developers, fewer people buy refrigerators. The refrigerator salespeople of the world who would have gone on a trip to Walt Disney World can no longer afford to go. The cycle repeats itself getting more and more destructive.
Our entire economy is based on a fragile series of interactions. You shut down one segment of the economy, and it will flow towards others. Coronavirus is like an Earthquake that hit off the coast of a major city. The Earthquake is really bad, but after a few scary minutes people start to get their bearings. Short-term shutdowns and lost interactions are bad, but we don’t panic. Little do people know the earthquake has created a massive Tsunami barreling at the city. The Earthquake already had strained resources, and now the Tsunami levels everything. If corona stays bad, we’re post earthquake pre tsunami. This could get really really bad.
Or it might not and everything will be good. But let’s not kid ourselves about this, I’m decidedly with @WDW Pro. Every day this goes on, the more and more possible this will leave carnage. Disney has tens of billions of dollars in contractual obligations over the next two years. They’ve probably burned through hundreds of millions since this started. There’s a good chance Hong Kong Disneyland and Shanghai Disneyland default on debt and need restructuring wiping out hundreds of millions on the balance sheet. The dearth of ESPN content may speed cord cutting. Disney+ is a stunningly good business, but still just a sapling that can’t bear fruit. I could go on. It’s bad.
If Disney is going to go bankrupt, it will be within a broader economic collapse that will leave you not very worried about Disney. Like 2009 will look like some minor turbulence.
Is this the most likely scenario? No. But think back two months ago. Was what happened with Corona the most likely scenario? I’d say your naive and ignorant January self would be horrified at what has happened.
Not trying to be scary, but @WDW Pro is roughly consistent with the type of fear I would expect to be gripping Burbank right now...
Of course, I’m just a guy on the internet. So... Grain of salt anyone?
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That’s the least of their worries.
When comparing Disney to Universal also remember Universal is owned by Comcast. Comcast’s main revenue source is cable, and that business in the shutdown is at worse stable and more likely growing as internet/cable is the only source of entertainment and a vital source to the work at home group. Disney+ is likely the only Disney revenue source growing currently and that is a fraction of their typical revenue.
HauntedMansionFLA
Well-Known Member
And just think of how long it’s going to take to make a profit when you add up the expense of buying FOX, starting and launching Disney+
Television advertising revenue has plummeted. Both Comcast and Disney are being hurt by that. Comcast not only receives your monthly fee, they are depend on the advertising sales to covervtheir costs and profits on the cable side of the house.
Anyway, the longer the shut down of the economy goes on the worse things will get and if it goes on to September, 6 months more, that would result in a loss of 50% of most of our 21 Trillion dollar GDP. EVEN 1/3 WOULD BE 7 trillion. Add to that the Stimulus package, three bills 2.5 Trillion, and at least 2 Trillion so far in lost GDP. That would total 11.5 Trillion and still leaves trillions of cists and losses out. Does anyone here actually think the country would survive that? Disney and Comcast are the least of our worries if this shut down continues for months. I said at the beginning we should keep the economy open and isolate thoee at risk. That was the way to go but the media covered the story as if was a hurricane and made everyone insist on closing everything. We are destroying our future and almost everyone will live to regret it.
Anyway, the longer the shut down of the economy goes on the worse things will get and if it goes on to September, 6 months more, that would result in a loss of 50% of most of our 21 Trillion dollar GDP. EVEN 1/3 WOULD BE 7 trillion. Add to that the Stimulus package, three bills 2.5 Trillion, and at least 2 Trillion so far in lost GDP. That would total 11.5 Trillion and still leaves trillions of cists and losses out. Does anyone here actually think the country would survive that? Disney and Comcast are the least of our worries if this shut down continues for months. I said at the beginning we should keep the economy open and isolate thoee at risk. That was the way to go but the media covered the story as if was a hurricane and made everyone insist on closing everything. We are destroying our future and almost everyone will live to regret it.
The media did not make “everyone” close everything. An accelerating death toll did.
As I’ve pointed out repeatedly in this thread, if you read their 10-K, you’ll realize that Disney could go without revenue for a year or longer without cutting a single expense before they went bankrupt. They are a well oiled cash generating machine, and this virus does not change anything about that in the long run.
They just secured 2 rounds of bonds in a week at rates that are only a couple percent premium to treasury bonds.
Those bonds got the same credit ratings as each of their last several rounds of offerings.
Wall Street even now is valuing the company at $174 BILLION dollars.
So no, Disney is not going bankrupt. That poster has absolutely no clue how corporate finance works.
The right thing to have done was to isolate those at risk. How are we going to pay for this? Maybe we look at medium family incomes of 60k, and increase taxes 10% on every cent of income over 120k, another 10% on everything over 250k so its 20%, and another 10% or 30% on income over a million. That will not even come close to paying the cost of this. We made a mistake and will see it sooner than anyone here realizes. The long term risks to themeparks like Disney and Universal is not Covid19 or any other disease, it's the taxes needed to pay for trying to make people whole because you can't. Remember, those tax increases are on top of what they already pay and it's not enough to pay the total cost.
Perhaps you should tell the world governments then.
DDLand
Well-Known Member
You’re absolutely right that Disney can raise capital right now. I said as much. The Walt Disney Company has weathered many storms through its nearly century of existence, and has implicit trust. Lenders will love to lend to Disney. But what happens if lenders don’t have funds on hand? The Federal Reserve could keep pumping lenders with cash, but then we’ll have runaway inflation. That will further put strain on already weakened systems.
At the end of the day, consumers have to start buying again. Yet there’s a future where consumers could be kept indoors for months. Then we have the possibility of a extended recession afterwards. If the Federal Reserve exhausts its options then Walt Disney may not be able to raise capital.
I’m not saying that this is going to happen. I said above that it’s unlikely. But this thing has been getting worse and worse. There is an increasing probability the economy could tank. Disney does have existing lines of credit and some capital on hand, but it is far from the Rock of Gibraltar.
Your rebuttal is like saying Disney can’t go hungry because they can go to the refrigerator and find some food. That’s true, as long as there is food in the refrigerator. Disney can cover its costs by going to capital markets. That’s true as long as capital markets markets have capital.
This is worst case scenario, but you can’t say it’s impossible. COVID-19 has a way of upending expectations...
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DDLand
Well-Known Member
Indeed. Though Epic Universe and those poor designers/engineers are in a delicate place. The market is hoping for a early May reopening where everyone starts spending and things go back to the way they were before. The market is naturally optimistic. Usually that optimism works, but not always.
If we do go into recession, I’d expect Universal to cancel the expansion. Increasing your capacity 30% when your existing parks are empty is insane.
Edit: 50% haha goof
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