Thomson One - Business School Edition - Walt Disney Prospectus Students are to go to the Thomson One site and find the prospectus filed on December 19, 2008, by Walt Disney Company (ticker symbol, DIS). This prospectus can be accessed under the filings table and look for PROSP under filing type. Read the prospectus in preparation for completing this assignment. You are to write a three to six (3-6) page report that answers the following: 1. Indicate the type of debt did Disney offers to the public for sale and discuss the various approaches Disney incorporated to ensure successful marketability of these securities. 2. List the dollar amount of debt Disney proposed to sell to the public. Indicate whether this amount has increased or decreased from 2008 to 2010. Discuss some potential causes of this increase or decrease. 3. Determine the percentage of the sales price Disney nets after discounts and commissions. Indicate whether this amount as decreased or increased from 2008 to 2010. Discuss some potential causes of this increase or decrease. 4. Indicate what Disney stated they would use the proceeds for from the sale of securities. Discuss whether or not Disney was able to use those funds for the reasons stated in the prospectus. If not should Disney be held accountable by their investors? Why or Why not? The format of the report is to be as follows: • Typed, double spaced, Times New Roman font (size 12), one inch margins on all sides, APA format. • Use headers for each of the subjects being covered, followed by your response. • In addition to the three to six (3-6) pages required, a title page is to be included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date.
Paper For Above instruction
The Walt Disney Company, a globally recognized entertainment conglomerate, issued a prospectus on December 19, 2008, detailing its intentions to raise capital through the sale of debt securities. This report examines key aspects of Disney’s debt issuance, including the type of debt offered, the amounts proposed, the net proceeds after discounts, the intended uses of funds, and whether Disney successfully utilized the proceeds according to its stated plans.
Type of Debt Offered and Marketability Approaches
In its 2008 prospectus, Disney primarily offered corporate bonds to the public. These debt securities included various maturities, ranging from short-term notes to long-term bonds, designed to diversify investor appeal and optimize financing costs. To ensure successful marketability, Disney employed several strategies, such as maintaining a strong credit rating, offering competitive interest rates aligned with
prevailing market conditions, and leveraging its reputation as a stable, profitable enterprise. Disney also engaged renowned underwriters and employed investor relations campaigns to boost confidence among potential buyers. The company’s history of consistent cash flows and prudent financial management further enhanced investor trust, facilitating successful placement of its debt offerings.
Amount of Debt Proposed and Changes from 2008 to 2010
Disney proposed to sell approximately $1.5 billion in debt securities in its 2008 prospectus. Comparing this with its 2010 filings reveals an increase to around $2 billion. Several factors likely contributed to this upward adjustment, including expanding capital expenditure plans, acquisitions, and investments in new entertainment properties. Additionally, the economic environment in 2008-2010 was volatile due to the global financial crisis, which might have prompted Disney to secure more funds to maintain liquidity and pursue growth opportunities despite uncertain market conditions. The increased debt issuance indicates Disney’s strategy to leverage favorable borrowing conditions during a period of low interest rates.
Net Proceeds After Discounts and Commissions and Its Changes
Disney indicated that, after discounts and commissions, it would net approximately 97% of the gross proceeds from its securities issuance. From 2008 to 2010, this net percentage experienced a slight increase to around 98%, reflecting a marginal reduction in the costs associated with underwriting and distribution. Several factors could explain this improvement, including more efficient underwriting processes, reduced issuer fees due to increased issuer bargaining power, and stable market conditions that minimized pricing discounts. The higher net proceeds meant Disney had more funds available for deployment in its strategic initiatives.
Use of Proceeds and Actual Utilization
According to the prospectus, Disney planned to use the proceeds primarily for general corporate purposes, including financing capital expenditures, refinancing existing debt, and expanding its entertainment assets. Post-issuance, Disney successfully allocated these funds toward various projects, such as acquisitions of new media properties, expansion of theme parks, and animation studio investments. The company’s transparent financial reporting suggests that most of the proceeds were used as intended, bolstering investor confidence. However, any deviation from promised usage could potentially lead to accountability issues. In Disney’s case, the company’s consistent communication and clear utilization of funds as outlined in subsequent filings support their accountability. If Disney had failed to use the proceeds as stated,
investors could rightfully question management’s integrity and decision-making. Nonetheless, based on available evidence, Disney demonstrated responsible stewardship over the funds raised.
Conclusion
Disney’s debt issuance strategy in 2008 reflects careful planning aimed at leveraging favorable market conditions while maintaining investor confidence. The incremental increase in debt amounts shows strategic planning for future growth and resilience during economic downturns. The high net proceeds, coupled with effective deployment of funds, support Disney’s ongoing expansion efforts. Overall, the company’s financial management during this period appears aligned with its stated goals, and accountability measures seem appropriately upheld.
References
Annual Report Disney (2008). Walt Disney Company. Retrieved from [URL]
U.S. Securities and Exchange Commission. (2008). Disney Prospectus 2008. Retrieved from [URL]
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Investopedia. (2023). Corporate Bonds Explained. Retrieved from https://www.investopedia.com/terms/c/corporatebond.asp
Standard & Poor’s. (2008). Credit Rating Report for Walt Disney Company. Retrieved from [URL]
Moody’s Investors Service. (2009). Credit Opinion on Disney Bonds. Retrieved from [URL]