Comcast has raised $ 4 billion through the sale of debt securities, according to an SEC filing amid an escalating economic crisis, following Disney, which raised $ 6 billion last Friday.
“It goes with the saying that fundraise when you can, not when you need it. Disney and Comcast are the two strongest companies in the media space and investors are happy to lend to them, so it’s no surprise that both have tapped into the bond market, ”a Wall Streeter said.
NBCUniversal theme parks are closed, movie releases staggered, and television production largely closed. The Tokyo Summer Olympics, scheduled to start in July, have been delayed, putting $ 1.25 billion in advertising revenue at risk. The company has warned, as many have done in recent weeks, that the coronavirus pandemic is having a significant negative impact on its business. Disney said pretty much the same thing.
Comcast has sold four tranches of bonds with maturities from 2025 to 2040 valued between $ 800 million and $ 1.75 billion, and with interest rates of 3.1% to 3.75% .
“I think they’re smart, and that scares me a bit too. Either they see the world a lot worse than we do, or they are just conservative and cautious, hoping for the best but preparing for the worst, ”said Wall Streeter.
Other companies have drawn on their revolving lines of credit – loans that banks have committed until a certain date but which can sit idle until companies draw down. Discovery yesterday withdrew $ 500 million from a $ 2.5 billion line of credit at the bank. And AMC Entertainment has used up their entire line of credit. It’s basically the equivalent of a home equity loan from your bank because you’re worried the money isn’t there or your bank is no longer willing to lend you when you need it. Businesses start paying interest on loans when they withdraw money.
One of the reasons the Federal Reserve has injected liquidity into the banking system is to ensure that banks have the resources to meet these obligations to companies.