Walt Disney Co. is selling $1.85 billion of bonds, including its first 30-year debt in almost a decade, as the Federal Reserve pledges record-low interest rates through mid-2013.
The world’s largest theme-park company plans to sell $750 million each of five- and 10-year notes and $350 million of 30-year bonds, said a person with knowledge of the transaction. Proceeds will be used for general corporate purposes, said the person, who declined to be identified because terms aren’t set.
Disney is selling bonds for the second time in 2011 even as Standard & Poor’s said the company already has “exceptional liquidity” that could cover its uses by more than two times during the next two to three years. Investors are seeking longer-term bonds for relatively higher yields after the Fed’s pledge last week while companies are taking advantage of about the lowest borrowing costs on record.
Yields on corporate debt maturing in 15 years or more fell to 5.42 percent yesterday, compared with the 1.72 percent on company debentures due in one to three years, according to Bank of America Merrill Lynch index data. Overall investment-grade bond yields tumbled to a record low of 3.45 percent on Aug. 4 before rising to 3.62 percent yesterday, the index data show.
Burbank, California-based Disney’s five-year notes may pay 60 basis points more than similar-maturity Treasuries, the 10-year notes may pay a 72 basis-point spread, and the 30-year bonds may pay an 87.5 basis point spread, said the person with knowledge of the transaction.
Disney last sold 30-year debt in 2002, Bloomberg data show. The company issued $500 million of 10-year notes in May, which was its first return to the bond market in more than two years, the data show.
The theme park operator sold $500 million of 7 percent, 30-year debt in 2002 that yielded 170 basis points more than similar-maturity Treasuries, the data show. The notes traded on Aug. 8 at 133.8 cents on the dollar with a spread of 79.6 basis points and a yield of 4.47 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Disney is rated A2 by Moody’s Investors Service and A by Standard & Poor’s, the data show.
The company is joined by Burlington Northern Santa Fe, the railroad purchased by Berkshire Hathaway Inc., in selling 30-year bonds today, said the person with knowledge of that transaction.