BOND Issue - New DVC Connection??

[Mickey'sApprentice]

Disney just took on new borrowing through a bond issue. This issue was increased from $1 billion to $1.5 billion. I know that Disney pays for DVC through membership sales. However, does anyone know how Disney initially finances the building of new DVC's, and could a big bond issue signal new building of DVC? I do know that Bonds tend to signal capital intensive projects. I'm thinking $1.5 billion is a lot of money even for Disney. What do you think?

Here is part of the article.
Sept 7 (Reuters) - Walt Disney Co. late on Wednesday sold $1.5 billion in a two-part global note sale, said joint lead manager UBS Securities LLC on Thursday.

The size of the deal was increased from an originally planned $1 billion.

Citigroup Global Markets Inc, Deutsche Bank Securities Inc. and Merrill Lynch were the other joint lead managers for the sale. BORROWER: WALT DISNEY CO. FIRST TRANCHE: AMT $750 MLN COUPON 10 BPS/ MATURITY 9/10/2009

 

[Stickytutu]

1.5 Billion for a new Vacation Club Resort??? I don't think so.

Now maybe 1.5 Billion for a new Park... maybe a fifth gate in Orlando... a park full of thrill rides with a Villians theme. Of course that is just rumor and conjecture, but - well, isn't that what these forums are all about?

And wouldn't that just be the coolest park EVER???

 

[MinnieGirl33]

1.5 BILLION sounds, to me, more like another park.

Or could it be multiple projects? Would it have to be for a single use/purpose?

 

[crisi]

Doesn't have to be anything at all. Sometimes companies play the interest rate game. Doubt it now, interest rates are a little high. But if Disney expects them to go higher, they may want to do their borrowing now.

They've said no fifth gate in Orlando. They've said it publically enough and to shareholders, so they'd be in for a shareholder lawsuit if they changed their minds - thats a pretty materials business direction change. They have, however, made sounds about more worldwide expansion (including saying something about South America) and have been talking for years about adding another ship or two.

 

[MinMouse]

Doesn't have to be anything at all. Sometimes companies play the interest rate game. Doubt it now, interest rates are a little high. But if Disney expects them to go higher, they may want to do their borrowing now.

They've said no fifth gate in Orlando. They've said it publically enough and to shareholders, so they'd be in for a shareholder lawsuit if they changed their minds - thats a pretty materials business direction change. They have, however, made sounds about more worldwide expansion (including saying something about South America) and have been talking for years about adding another ship or two.

Another ship you say, I like that one!

 

[MinMouse]

Another ship you say, I like that one!

Or two!

 

[Plutofan]

If anyone is interested one half of the proceeds has an initial maturity date of 9/10/2009 with the other half matures 9/15/2016. It seems like they only feel like they need the first $750,000,000 until 9/10/2009. May be they think that they will have enough money coming in to pay off the debt. With interest rates going up I am surprised that the first loan would be so short term since Disney is pricing the 9/10/2009 note with an interest rate of 5.625 which seems like a pretty favorable rate for Disney. May be they will get the next DVC built by late 2008 if there is any relationship. Only time will tell.

 

[DisDaydreamer]

If I had a billion dollars... I'd be rich!

I agree this must be for very BIG capital expenditures. Ok... so Royal Carribean just purchased a new cruise ship in February at $1.24b and it is to be a 5400 passenger ship. A new disney ship might be 1/2 that size (I hope). Sounds like a lot more money to spend on something BIG. Obviously not a 5th gate as stated. No way would money would be secured at this time for a new park on not yet owned or zoned property. Seems like too much money ($500-$800m) for AKL add-on, and not enough for CRV and AKL both. So I'm voting for a new ship and CRV.

 

[Horace Horsecollar]

Before anyone gets too excited, this could just be a way to retire other debt. Keep in mind that Disney took on a lot of debt when they purchased Fox Family Network (now ABC Family Network).

In any case, I doubt that this $1.5 billion is earmarked for a specific, new capital expenditure. Essentially, the funds will go on the corporate books, and Disney will continue to make major capital decisions at a corporate level.

I expect to see a new DVC resort announced in the next 6 months, and I expect the timing of the construction and occupancy to be managed so that Disney will be able to make a smooth transition from selling SSR to selling the next DVC resort. However, the financial transaction in the news — the $1.5 billion, two-part global note sale — is not specifically for future DVC expansion.

 

[DisDaydreamer]

Before anyone gets too excited, this could just be a way to retire other debt. Keep in mind that Disney took on a lot of debt when they purchased Fox Family Network (now ABC Family Network).

In any case, I doubt that this $1.5 billion is earmarked for a specific, new capital expenditure. Essentially, the funds will go on the corporate books, and Disney will continue to make major capital decisions at a corporate level.

I expect to see a new DVC resort announced in the next 6 months, and I expect the timing of the construction and occupancy to be managed so that Disney will be able to make a smooth transition from selling SSR to selling the next DVC resort. However, the financial transaction in the news — the $1.5 billion, two-part global note sale — is not specifically for future DVC expansion.

Horace, I think you should go pour yourself a glass of wine... You're being too sensible to have fun

 

[dwelty]

Bob Iger has made it a priority to fix Disney's California Adventure this decade, I think before a new gates opens in orlando this will happen.

For those of you that are interested 1.5 billion is about what it cost to build DCA/Grand California/Downtown Disney, and the largest parking structure in the western Hemisphere (at Disneyland resort) This was financed thru a similar bond. (I was working for Disney when this all happened) of course, it would not take this much money just to fix DCA, but if it is for Capital improvement I am sure it's at the top of the list.
I don't think that it will be necessary for a bond to be issued for another DVC. Why should Disney pay interest to finance something that will be in pre-sale during construction. They can self finance a project of that size.