Walt Disney Prospectus #1 Disney offered a five-year bond at 4.5% for sale. These are classed as Global Notes and they were available in denominations of $2,000 minimum and $1,000 after the first $2,000. The notes cannot be redeemed prior to maturity, but the company can redeem at any time at fair value. These are fixed rate notes at 4.5% and they will be paid out semi-annually. The global notes means that they are cleared both in the United States and in Luxembourg, allowing the company to tap the European financial markets. One of the main underwriters, Deutsche Bank, is partly responsible for the European part of the issue. The debt is, however, wholly denominated in US dollars.

There are several steps that Disney undertook in order to enhance the marketability of the debt securities. First, the price and conditions of the issue need to be favorable for the market conditions. Second, Disney itself has to demonstrate that it is a low risk relative to the return, and it does this via a sound business model, good credit rating and demonstration of liquidity. The prospectus highlights each of these components.

The prospectus contains a number of different stock elements that any prospectus from a public issuer will contain. These include a description of the notes, which outline the terms and conditions of their notes, their issue, their redemption and payout. The company can make the issue more attractive to the market by offering fair market value and terms that are in line with market norms. If the offering is perceived as superior in some way, typically relating to the risk-return balance, then the offering is more likely to sell out. So Disney has to set the rate and the terms in line with market expectations at best, and possibly slightly better than market expectations, to ensure that the issue will be bought. The marketing of the issue in this sense might also include the choice of underwriter. For an issue this large it is important that the underwriter is able to buy a substantial portion of the issue, so that less of it hits the broader market. Not all $1 billion will hit the open market; and in some cases very little of it might if the underwriter is able to place a large percentage of the issue....

In this case, Disney is placing the issue with three major underwriters -- JP Morgan, Citigroup and Deutsche Bank -- in order to ensure that the entire amount is placed.
The next step is that Disney has to demonstrate to the market the ability to pay, which is the most important aspect of a debt security. Default risk is typically evaluated by debt rating firms, and these firms issue a credit rating. These ratings are typically used to benchmark appropriate real returns on the bond market. To obtain the best rating possible -- and thus the lowest rate -- Disney will need to demonstrate a high degree of liquidity. This is done both through an evaluation of the company's financial statements but also through evaluation of the operations of Disney itself. For example, if Disney is already highly leveraged and its revenues are declining, the debt will cost it quite a bit more money. If, on the other hand, Disney has minimal debt and a strong, steady cash flow, it will receive a lower rating. The lower the perceived risk, the more potential buyers there are for the issue, which lowers the price. In the prospectus, Disney outlines the risk factors, but it will also need to show, whether in the prospectus or otherwise, that it has plans to address the different risk factors.

The discussion around the use of proceeds and the discussion about the ratio of earnings to fixed charges both serve to assuage the market with respect to the risk that Disney faces, and its ability to pay. The market needs to have confidence that Disney's plan for the proceeds of the loan will be sufficient to generate income that can be used to pay the loan back. If the market lacks this confidence, it will likely demand a higher rate of return.

#2. The issue in total is $1 billion, but the dollar amount that goes to the public is slightly less than that. The bonds are being sold at a slight discount, 99.026, and the underwriters take a commission as well. The total amount that Disney will raise through this issue is $986,760,000.

The question with respect to 2010 makes no sense -- the prospectus is dated 2008 and therefore says nothing about the value of the issue in 2010. A search of the document for "2010" yields no hits. In any event, the dollar amount that Disney sold to the public wouldn't change. The value of the bonds would change from 2008 to 2010 due to…