S&P downgrades Disney by one notch to A ahead of Fox deal

S&P Global Ratings downgraded Disney Co.'s ratings to A from A-plus on Tuesday, citing operational risks in its pending acquisition of parts of 21st Century Fox Inc. . Disney is getting ready to close on a deal that will see it acquire 20th Century Fox Studio, certain U.S. cable networks and Fox's key direct-to-consumer platforms, including a 30% stake in streaming service Hulu and STAR India. Disney is required by the U.S. Justice Department to sell off regional sports networks to get regulatory approval of the deal. "While our base-case forecast shows that Disney could reduce leverage back to under 2x (the downside threshold for the prior 'A+' issuer credit rating) within two years, we believe Disney faces internal and external challenges that could delay that deleveraging process, resulting in adjusted leverage remaining above 2x," S&P wrote in a note. The stable outlook reflects the agency's expectation that Disney will manage to navigate the changes without breaching the 2.5x threshold. Disney shares were down 0.2% but have gained 8.9% in the last 12 months, while the Dow Jones Industrial Average have gained 1.6%.

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