A question for our lawyers out there...

[Deanna Washington]

Hi all,

Can Disney's Credit Rating affect DVC?

I have been reading about Disney's poor showing lately in the market and how they will most likely have their credit rating downgraded soon. In the event that Disney declared bankruptcy and reorganized, would that in any way jeopardize our standing as DVC members?

I haven't heard any rumors, just seems like credit downgrades and bankruptcy go hand in hand now-a-days.

 

[Dean]

I'm not a lawyer but technically we bought a Timeshare. As long as our home resort is standing and operational, we get what we paid for. Obviously we were all counting on WDW being there but there is no guarantee. So if we have a place to stay at our home resort, DVC has upheld their part of the bargain. If it's any consolation, all the other timeshares in Orlando would be in just as bad if not worse shape if the worst were to happen.

 

[drusba]

Based on financials of Disney, you are not looking at a company that has any risk of bankruptcy (it does have a piece of junk called ABC that either has to get better quick or be sold). Moreover, its auditor was not Andersen (I know of people who, after Enron, actually just started selling short any company audited by Andersen and they have made money doing so.) However, if that unlikely event would ever occur it could have an impact:

1. The Disney subidiaries that control DVC are Disney Development Co. (DVD; your actual seller of the timeshare) and its related entities Disney Vacation Club Management Company (DVCMC; which manages and administers the resorts) and Buena Vista Trading Co. (which controls all trades and most of the DVC reservation system along with DVCMC). If Disney were to go bankrupt overall, it would take those entites with it.

2. Those documents you receive at time of purchase from DVD which contain all the legalese for the transaction (and to read them is like stirring concrete with your eyes) do provide that the bankruptcy of the Disney entities would be a grounds for cessation of the agreement that establishes the DVC reservation component and the ability to make reservations at a resort other than your home resort; i.e., you would no longer be able to make DVC ressies at the various resorts -- you could still make them at your own home resort only but the members would need to set up a new system to go about doing it. Also, and more of an impact, is that bankruptcy of the Disney entities is stated as one of the grounds under which the lease of the property on which the resorts sits -- which is a lease until January 31, 2042 from the Disney parent company to the Disney subsidiary DVD -- can be terminated and termination of that lease essentially means you are SOL and locked out of the property. Nevertheless, the kind of bankruptcy contemplated by the documents is not just a reorganization that leaves the Disney entities in place after it is over but one that is a true bankruptcy or dissolution which would result in any Disney property, such as the parks, being sold to pay debt.

 

[Deanna Washington]

Thank you for that very thorough explanation. Walt is probably rolling in his grave over the fact that we are even having this conversation.

Thanks again.

 

[DLVisitor]

I think Walt turned over in his grave when Disney was involved with green mail (I think that is the name of it) a few years ago and everything was going to be sold off piece by piece! Disney's history is that the stock goes up...splits...takes time to go up again. THe economy isn't helping either. Wish I could afford to buy more stock at this price!

 

[jimmytammy]

We are Dis shareholders, and DVCers and just about everything else that Disney has to offer ( like the majority of the posters on this discussion board ) What I would like to add to this post is my opinion for what its worth. My thinking is that Disney 1. has been around a long, long time, that helps to establish them as a strong company that has seen rough times before. My 70 yr. young Dad has told me when you go through tough times
( personal OR business ) you usually come out stronger and wiser for it. 2. The stock has been up and down for many yrs. with all kinds of variables affecting it. But so has every other stock out there. 3. I watch my stocks through my portfolio on AOL. Every once in a while I look at the message board for Dis stock just to see what the naysayers are saying. Usually its Eisner bashing, heck the other day someone even went so far as to say that Disney was the anti-christ. I have to believe that person hasnt really read the Bible to get enough info. on such matters. 4. WE WOULD NOT HAVE BOUGHT INTO DVC THIS YEAR HAD WE FELT ANY CHANCE OF DISNEY GOING BANKRUPT OR ANY TYPE OF HOSTILE TAKEOVER AND TAKEN THE CHANCE OF LOSING OUR DVC MEMBERSHIP. I think most Dvcers feel great about belonging and see this system continuing to grow. It has grown a lot since our Jan. 2002 joining.

Sorry for such a long post, just expressing my thoughts and concerns.