Fitch Ratings assigns an ‘AA-‘ rating to approximately $59.1 million of California Infrastructure and Economic Development Bank (the issuer) revenue bonds series 2008, issued on behalf of The Walt Disney Family Museum, (the museum).
The bonds are ultimately secured by the absolute and unconditional guarantee of the Walt and Lilly Disney Foundation (the Disney Foundation) payable from loan payments to be made by the museum pursuant to a Loan Agreement between the museum and the issuer. The loan payments are an unsecured general obligation of the museum. The bonds are predicted to sell via negotiation on or about March 11, 2008. The Rating Outlook is Stable.
Proceeds of the bonds will fund a portion of the $113.2 million Walt Disney Family Museum Project, including the renovation and adaptive reuse of the museum building and two related buildings, and pay capitalized interest. There is no debt service reserve fund. The bonds will be the only outstanding debt of the museum and the Disney Foundation. The remaining project costs will be funded by an equity contribution from the Disney Foundation.
The ‘AA-‘ rating is supported primarily by the guarantor’s financial strength and low debt burden; the strength of certain bondholder protections; and the ideal location of the museum in a tourist destination city. Additional credit strength is derived from management’s commitment to the project and the lack of bondholder dependence upon museum operations and/or fundraising efforts for debt service payments.
As of fiscal 2007, the Disney Foundation’s unrestricted cash and investments equaled $258 million. Using the most conservative assumptions regarding liquidity, the Disney Foundation’s available funds provide over 3 times coverage of total proforma debt. Mitigating credit factors include the liquidity risks posed by stock market volatility; the lack of institutionalized policies and procedures which could complicate the succession of current leadership; and the remaining construction risks of the project.
The lack of a debt service reserve fund was viewed negatively in the rating process given the non-traditional nature of the project and the transaction’s participants’ lack of experience in the capital markets. The Stable Rating Outlook reflects Fitch’s expectation that the guarantor’s current liquidity levels will be maintained and that the project will be completed on time and within budget.
The Walt Disney Family Museum Project will be located in the Presidio of San Francisco and will comprise three historic buildings: a 59, 000 square foot museum; a 17, 000 square foot building housing archive, administrative and additional exhibition facilities; and a 1, 195 square foot mechanical plant facility. The museum is a family endeavor and will tell the story of Walt Disney’s life through 10 galleries using a mix of different media, state of the art technology, and the personal effects of the family and its historic objects. Although some items will be licensed from the Disney Company, the Disney Company is not involved in the project. The museum is expected to open in August 2009, with the additional galleries coming on-line in 2011.