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Investing in Walt Disney Company
Characteristics of its bonds
Apparently, Disney's bonds seem to be in an enticing situation. After a dip during the past years, Disney's bonds seem to be in great demand. In June of this year -- little less than 3 months ago - it offered a 3.75% banking 10-year paper with over $25mm. This was the hot-shot then, specially in a time when post-holiday trade was lax, and investors were eager to grab it leveraging the bond's cost by eight-cents per $1,000 face worth to 100.68 consequently dipping the concede to 3.66%. (Wilkinson, 2011).
Reinforcing the optimistic perspective is that earlier this month, Walt Disney sold five-, ten- and thirty-year bonds with the lowest coupons ever in a three-part $1.85bn U.S. debt offering each of which consisted of the equivalent of $750m in each of the notes. Disney seems to be doing well since Financial News (2011) reports that this is its largest debt offering since 1996 (in which year according to Dealogic it sold a $2.6bn deal.)
All three utterances sold exceedingly well outbidding prices set by Colgate-Palmolive and Johnson & Johnson of the previous year. All yielded Disney high yields. In fact, Financial News (2011) observed that all launched at the narrow end of price guidance assessing that this is indicated good demand. Moody's Investors Service rated the deal as A2 and A by Standard & Poor. That indicates superb performance. For better comparison, Disney's performance can be compared to the Burbank, the well-known media company that...
The Morningstar credit rating for Disney's bonds situation is the highest possible -- A+. Its debt is $7.7billion. Its issuer type is corporate; its overall value (Debts / Assets) is 18.62%, and its sector is consumer cyclical.
The fact, too, that Walt Disney issues -- and that people -- eagerly accept its 100-year bonds indicate the enduring popularity of Disney bonds. After all, why would a company offer bonds that exceed a person's life expectancy? And why would a company put itself at risk to offer something that very few companies do? One of the very few other multi-million companies that offer 100-year bonds is Coca-Cola. Bonds with these long maturities indicate not only the company's belief in its resilience but also an indication of consumer sentiment for the company's value. There is an especially high-demand for Disney's 100-year bond pointing to both internal and external belief of Disney's value and endurance. Altogether, analysis of Disney's mature bonds shows that institutional investors prefer these bonds since it lengthens the duration of the bond portfolios enabling them to fulfill certain goals (Investopedia: Web)
In short, most analysts predict that shares in Disney will spring back from an outing descent to the good news =- and well tested at that -- of…
References
Financial News . (08/18/2011). Walt Disney sets low-coupon records with debt offer http://www.efinancialnews.com/story/2011-08-18/walt-disney-lowest-coupon
Grossman, T. & Livingstone, J.L (2009) The portable MBA in finance and accounting Wiley & Sons, USA.
Investopedia: Why do companies issue 100-year bonds?
www.investopedia.com/ask/answers/06/100yearbond.asp
Wilkinson, A. (5/31/2011). Walt Disney paper entices bond investors. Forbes.com http://www.forbes.com/sites/greatspeculations/2011/05/31/walt-disney-paper-entices-bond-investors/
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