Disney Seizes Low Interest Rates With Fourth Bond Sale in Year

Walt Disney Co. raised $1.4 billion in its fourth bond sale within a year as the biggest U.S. entertainment company by market value takes advantage of corporate bond yields at about record lows.

The company issued $1 billion of 1.125 percent, five-year notes that yield 47 basis points above similar-maturity Treasuries and $400 million of 2.55 percent, 10-year debt at a 62 basis-point spread, according to data compiled by Bloomberg. Before today’s offering, Burbank, California-based Disney had sold $3.95 billion of bonds since May, the data show.

Disney joined blue-chip American companies from Procter & Gamble Co. to McDonald’s Corp. in snagging borrowing costs at almost all-time lows as the Federal Reserve pledges to hold interest rates near zero percent through at least late 2014. Average yields on investment-grade debt sank to 3.53 percent yesterday, 8 basis points above the record low of 3.45 percent reached in August, according to Bank of America Merrill Lynch index data.

“We’ve obviously increased our debt because of the availability of money at these great rates,” Chief Financial Officer James Rasulo said in a Feb. 7 conference call to discuss earnings. “For what we borrowed in both the amounts and our rating, we really almost always in the past year saw historically low coupon rates on that debt.”

The company cut borrowing costs on both of its issues today, Bloomberg data show. Disney offered $750 million of 1.35 percent, five-year notes in August, a record low at that time, and $750 million of 2.75 percent, 10-year debt.

Timing Debt Issues

In Disney’s previous bond sale in November, the company set a 0.875 percent coupon on $1 billion of three-year notes, its lowest ever, Bloomberg data show.

“We’ve timed our steps into the debt marketplace very carefully and put a lot of time into picking what we think will be a low entry points and we’ve been very successful in doing that,” Rasulo said.

Before the string of offerings in the past year, Disney had last tapped the market in 2009 for $500 million of 5.5 percent notes, Bloomberg data show.

The company is graded A2 by Moody’s Investors Service and an equivalent A by Standard & Poor’s and Fitch Ratings, Bloomberg data show.

Disney has room to issue more debt while maintaining its single-A credit grade, which “served us incredibly well over the past decade including when liquidity dried up for most companies in 2008,” Rasulo said in the conference call this week.

“We’ve got a couple of maturities that we’d like to fill in and when we see the opportunity to step in at great rates I think you’ll see us doing that,” he said. “As time passes we’ll have some maturities that we’ll refill but don’t expect us to back the truck up to the point where we have to give up that great debt, that great balance sheet and great Standard & Poor’s rating.”

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