In this Disney reopening roundup, we’ll cover the latest meeting by the Orange County Economic Recovery Task Force during which Walt Disney World reiterated that a July opening is not certain, Disney’s rising debt, and the possibility that Disneyland could stay closed until at least August.
We’ll start with Disney’s new debt offering, as that is the backdrop against which the company is making other decisions that impact its financial health. In a new SEC prospectus, the Walt Disney Company disclosed that it has raised another $11 billion in new debt to weather the current crisis that has closed its theme parks and theaters, while halting film, television, and Disney+ productions.
Disney stated that the proceeds would be used for general corporate purposes, including the repayment of other near-term debt, while these senior notes will mature between 2026 and 2060. As you’re undoubtedly aware, Walt Disney World and Disneyland have been closed since mid-March. In Disney’s latest quarterly earnings call, the company revealed that profits were down 91% and the closure of the theme parks alone cost Disney $1 billion in lost revenue.
The Walt Disney Company has already cut executive salaries and furloughed more than 100,000 employees, while also raising raising billions in previous debt rounds to survive the current situation. At the end of last quarter, Disney’s current debt maturities were $12.7 billion over the next twelve months, while the company had $14.3 billion in cash on hand.
This comes as Shanghai Disneyland is open once again, albeit at a significantly reduced capacity. Given that attendance is capped at below 30% capacity, the park is likely operating at a loss. The same will probably be true for Walt Disney World and Disneyland when they first reopen, but incremental attendance caps are a necessary prerequisite to resuming normal, profitable operations.
For those wondering why All Construction Has Stopped at Walt Disney World, there’s your answer. With roughly $20 billion in new debt since the parks closed (on top of previous debt rounds prior to that) coupled with losing $30 million each day the parks are closed, Disney is looking to cut costs.
Theoretically, doing refurbishments and construction while no guests are around would be ideal, but Walt Disney World does not exist in a “theoretically ideal” world. As with everyone else, Disney is constrained by the practical realities of present circumstances.
Next, a look at the latest prospects for Disneyland. One emerging theme to the closures has been that Disneyland’s trajectory could be behind that of Walt Disney World due to divergent approaches being taken by California and Florida. In our recent Disneyland Delays Reservations Another Month, we shared the optimistic note on how San Diego is coming up with a plan to allow its theme parks to potentially reopen earlier, but that’s still probably months away.
Now some pessimistic news out of Los Angeles. That county’s officials are recommending that the stay-at-home order currently set to expire on May 15 be extended for another three months, with Los Angeles County’s Public Health Director saying the extension will happen “with all certainty” unless dramatic changes occur.
However, a couple things are worth noting here. First, Disneyland is not located in Los Angeles County–it’s in Orange County. The sentiment there has been markedly different, with yesterday’s Orange County Board of Supervisors meeting reflecting a desire for California to issue more realistic criteria for urban counties to fast-track phase two, and identify strategies for achieving a safe, reasonable, and sustainable reopening of Orange County’s economy.
Second, even in Los Angeles County, restrictions are being gradually relaxed under California’s four-phase plan. Beaches are reopening this week with restrictions, and some in-restaurant dining and shopping malls could also be allowed to reopen in the coming weeks. That would still leave theme parks several months away. Los Angeles County is home to a huge population of Disneyland Annual Passholders as well as Disney’s corporate headquarters, so how LA proceeds definitely could have an impact on Disneyland, as well.
Finally, another update from the Orange County Economic Recovery Task Force. During the latest virtual task force meeting (embedded above for your viewing pleasure…not that we actually recommend watching), the tone of the meeting was mostly upbeat and optimistic, with several participants expressing a belief that Orange County is doing everything right and trending in the right direction for a more aggressive reopening.
This was tempered by there was extensive conversation about the perception of safety, plus the uncertainty and risks posed by a second outbreak in the fall. There were also worries about a significant resurgence in local cases once more businesses start reopening and visitors return to the area. This in turn could overwhelm local hospitals and also discourage tourists from returning to Florida.
Thomas Mazloum, SVP of Walt Disney World Resorts & Transportation, spoke briefly and reiterated that the booking of reservations starting on July 1 is not necessarily indicative of a reopening date:
“We have taken reservations for July, but that should not mean we are operating in July yet. As you all saw on the news yesterday, we opened up Shanghai, which went extremely well. We were very prudent and very conservative, and things went extremely well. But at this point, we have really nothing to report about Walt Disney World yet. As we have said continuously, we will allow data to guide us as well as the government and not a specific date. So just wanted to make sure we had clarity around that.”
Mazloum was asked about Shanghai Disneyland, and indicated that the Walt Disney Company viewed the reopening of Shanghai Disneyland as a “stair-step” and a “baby step.” He also stated that the company was very encouraged by what they’ve seen thus far in Shanghai. He stated that the park was very disciplined, as were guests. (Which reiterates what CEO Bob Chapek said the previous day about much of when and how reopening goes being dependent upon guest behavior and acquiescence.)
While this might read pessimistically, it’s worth reiterating the signs of optimism. Disney Springs will reopen next week, with an ever-increasing roster of restaurants. Universal’s CityWalk reopens tomorrow! What got lost in the mask controversy that came out of CEO Bob Chapek’s interview is that it otherwise was fairly upbeat. There are signs of life again in the theme park world, and there’s plenty to be positive about.
Finally, I want to once again stress the importance of empathy and respect for those who choose to comment. We welcome a variety of viewpoints here, and will never delete anything on substance alone. However, we will not tolerate insults, arguing, or politically-charged comments. Don’t ruin a 95% fine and intelligent comment with an unnecessary cheap shot, as that 5% will get it deleted. You’re not changing any minds via the comments section of a Disney blog, so please do not incessantly harp on the same point. Say your piece and move along. If you want your voice to matter, contact Walt Disney World directly.
Ultimately, it might do us all collective good to take a step back and realize that even though this is most definitely not the new normal, some degree of compromise and flexibility will be necessary as we endure this temporary abnormal. Those who let perfect be the enemy of good are either going to be housebound for the next year-plus or will be protesting every inconvenience over which they have zero control, as the case may be. It might not be the time for unyielding rigidity–making lemonade out of lemons is probably the best case scenario for now. With all of that said, we truly appreciate everyone who reads and comments. It’s always illuminating to hear others’ perspectives, especially the thoughtful rationale of those with whom we may disagree.
What do you think of this news? Does Disney’s growing debt concern you at all as a fan? What about the latest developments surrounding reopening dates at Disneyland and Walt Disney World? Any questions we can help you answer? Again, keep comments respectful, apolitical, and on topic. Anything not following these requirements will be removed, as will excessive back and forth arguments.