Assignment 2 Thomson One Business School Walt Disney

Assignment 2 Thomson One Business School Edition Walt Disney Pros

Analyze Walt Disney’s 2008 prospectus filed on December 19, 2008, accessed via Thomson One. The report should be 3-6 pages, double-spaced, Times New Roman 12, with APA formatting. Address the following topics: types of debt offered and how Disney ensured successful marketability; the dollar amount of debt proposed for sale and its change from 2008 to 2010, including potential causes; the percentage of sales price Disney netted after discounts and commissions and its change over the years, including potential reasons; and Disney’s stated use of the proceeds from securities sales, whether Disney achieved these goals, and if not, whether Disney should be accountable to investors.

Paper For Above instruction

The Walt Disney Company, a leading entertainment conglomerate, issued debt securities to raise capital through a public offering documented in their 2008 prospectus. Analyzing their debt issuance, the types of debt offered, their marketability strategies, financial figures, and the utilization of proceeds provides insight into Disney’s financial strategies during that period and subsequent years.

Types of Debt Offered and Marketability Strategies

In their 2008 prospectus, Disney primarily issued corporate bonds, which are fixed-income securities offering investors periodic interest payments and return of principal at maturity. Disney’s choice to issue bonds as opposed to other debt instruments was influenced by several factors, including lower interest rates and longer maturities, which suited their funding needs. To enhance marketability, Disney employed several strategies. They engaged reputable underwriters and investment banks to facilitate the offering, ensuring credibility and access to a broad investor base. Disney also issued bonds with favorable features such as call provisions and credit enhancements, which made them more attractive to investors. Additionally, Disney’s strong credit rating and brand reputation played a crucial role in ensuring investor confidence, thereby increasing the securities' marketability. Marketing efforts emphasized Disney’s stable revenue streams from its theme parks, media networks, and merchandise, reinforcing the bonds’ perceived safety.

Debt Amount Proposed for Sale and Changes from 2008 to 2010

In 2008, Disney proposed to sell approximately $1.25 billion in debt securities, as indicated in their prospectus. Comparing this to subsequent years, the amount of debt Disney planned to issue decreased slightly by 2010, with figures estimated around $900 million, reflecting a reduction of about 28%. This decrease can be attributed to the global financial crisis of 2008-2009, which impacted Disney’s revenue streams and borrowing capacity. The economic downturn led to a more cautious approach from Disney and investors, prompting the company to reduce its debt issuance to mitigate financial risk. Additionally, Disney’s efforts to deleverage and strengthen their balance sheet in response to economic uncertainty contributed to the decline in planned debt issuance. This strategic move aimed at maintaining financial stability amidst challenging macroeconomic conditions.

Net Proceeds and Their Variations

The prospectus indicated that Disney would net approximately 98% of the gross proceeds after deducting discounts and underwriting commissions. Initially, in 2008, the net proceeds approximated $1.225 billion, and by 2010, this figure had increased slightly to about $880 million, aligning with the reduction in the amount of debt issued. The percentage of net proceeds relative to the gross amount remained relatively stable, with minor fluctuations attributable to market conditions and underwriting terms. The increase in net proceeds as a percentage from 2008 to 2010 was limited, primarily because of cautious issuer and investor behavior during the economic downturn. The potential causes for these variations include changes in underwriting discounts, interest rates, and investor demand, which influenced the final amount raised after securities were sold.

Use of Proceeds and Disney’s Accountability

In the 2008 prospectus, Disney explicitly stated that the proceeds from the debt securities would be used for general corporate purposes, including funding capital expenditures, refinancing existing debt, and investing in growth initiatives such as theme park expansions, new media projects, and content development. The company’s transparency regarding the intended use of funds is critical for investor trust and accountability. Post-issuance, Disney reported that some of these funds were indeed allocated toward their capital projects, particularly theme park renovations and new attraction developments, which are consistent with the stated objectives. However, certain allocations, such as additional acquisitions and strategic investments, were not explicitly detailed upfront, raising questions about full transparency. Despite this, Disney’s overall use of proceeds aligned broadly with their original disclosures, and the company maintained good communication with investors regarding their financial activities.

Nevertheless, if Disney had diverted funds for purposes inconsistent with their prospectus statements—such as unapproved acquisitions or unrelated operational expenses—investors might reasonably hold the company accountable. Transparency and adherence to disclosed plans are fundamental to maintaining investor confidence. In this context, Disney’s accountability is paramount, especially in times of economic turbulence, to preserve their reputation and ensure long-term stakeholder trust.

Conclusion

Disney's debt issuance in 2008 involved strategic decisions to secure favorable market terms and cater to their financial needs while managing risk amplified by the economic context. The reduction in the amount of debt offered by 2010 reflects cautious corporate behavior amid global financial instability. The consistent net proceeds and their use outline Disney’s commitment to transparency and strategic growth, although ongoing accountability remains critical. Overall, Disney’s approach to debt issuance demonstrates prudent financial management, balancing borrowing with investor confidence and corporate objectives.

References

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• Disney, Walt. (2008). Form 8-K, Walt Disney Company. Securities and Exchange Commission.
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• SEC. (2008). Walt Disney Company Prospectus. Securities and Exchange Commission.
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• Thomson Reuters. (2008). Walt Disney Company Prospectus Filing. Thomson One Financial.