Fox Borrows $6.8 Billion to Help Fund Dividend in Disney Deal

(Bloomberg) -- Fox Corp. sold bonds to help finance a special dividend related to its acquisition by Walt Disney Co.

The unit of 21st Century Fox Inc. issued $6.8 billion of senior unsecured bonds in five parts, according to a person with knowledge of the matter. The longest portion of the offering, a 30-year security, will yield 2.5 percentage points above Treasuries, after initial talk of around 2.7 percentage points, said the person, who asked not to be identified as the details are private.

The issuing entity will be spun off from 21st Century Fox per the $72 billion transaction with Disney, and as such will pay a one-time special dividend to its former parent of $8.5 billion, according to a filing last week. Fox is expected to use cash on hand and potentially draw on its revolver to fund the remainder, according to the person.

21st Century Fox, founded by Rupert Murdoch and led by his son James, is expected to maintain investment-grade ratings after the transaction. Moody’s Investors Service rates the new notes Baa2, two steps above speculative grade, while it rates 21st Century Fox one step higher and may upgrade it upon the close of the Disney deal. S&P Global Ratings has an equivalent rating on 21st Century Fox and also may raise it.

“The Murdochs have a track record of maintaining a conservative balance sheet at 21CF and we expect this will help reassure investors when looking at the new Fox issue,” CreditSights said in a report Monday.

Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc. managed the bond sale, the person said.

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