S&P lowered the rating from "A-minus,"citing Disney's difficulties in getting its theme park and television network businesses back on their feet.

S&P also said it was concerned about Disney's cash flow, which is expected to be lower for its 2002 fiscal year, which ended Sept. 30.

Disney (DIS) fell 95 cents to $15.05, a decline of 6 percent.

S&P analyst Heather Goodchild said Disney might not be able to get cash flow levels back up until fiscal 2004, which begins next Oct. 1. Disney had $13.1 billion in debt as of June 30, S&P said.

"I think this year is going to be a more gradual recovery," Goodchild said. "You won't have the consistent strength you would hope to have."

In response, the company said in a statement: "We have worked to reduce our leverage this year. We see this rating action by S&P as the result of short-term business conditions, and we remain optimistic about the prospects for the Walt Disney Company."

While it reduced Disney's long-term credit rating, S&P also took Disney off credit watch. It also reaffirmed Disney's "A-2" short-term corporate credit rating, which was not on watch. Further, S&P called Disney's outlook "stable."

Goodchild characterized those two developments as a "good sign." She said there is reason for hope at the network, which seems to be experiencing a ratings rebound and is seeing a pickup in ad spending.

But the theme parks remain an issue. Domestic facilities still have trouble attracting visitors from overseas, particularly at Walt Disney World, she said.

Friday's action comes two months after S&P placed the entertainment giant on credit watch and a year after S&P last downgraded the company.