Growing older but not up.
- Jul 7, 2009
Yould have a better understanding then most people when it comes to the financial things. I dont mind it at all.Interesting take. I'd quibble with some of your points, but they do make sense to the average reader.
Yes, Disney will do everything to get the best possible loan terms when they do any long term financing. Short term as well. Its just good business. Disney being such a large, well respected company can usually negotiate for better rates than other less qualified companies.
By spending a dime on their ships I believe you are referring to the up-front cost. Of course the ships aren't free. They are paid for from the proceeds of a long-term loan and then the loan itself is paid off by Disney. They spend many, many dimes on their ships. It just goes through a middle-man.
Yes, they pay off loans from the revenue on the sailings. That's the only way they get the money to make payments. The only reason to pay off a loan early is if Disney has better use of that money. Disney might be able to borrow at a lower rate than the loan carries. Or the other possible uses of those funds don't provide a return large enough, so the excess cash is used to buy-down the loan.
Please understand that these comments are from a recovering bean counter who just wants to be sure that the realities of the world of corporate finance are better understood.
When I mentioned the Dream class being payed off early, I believe that initally DCL had anticipated say based on 70% occupancy. When the ships came out they were closer to 100% so they could make a larger payment over a shorter period of time. So the loan got played off earlier Could Disney have other uses, it's entirely possible I dont think anyone fully knows what Disneys up to outside their corporate offices
The upfront costs if it's not by 1 single loan from multiple sources, I'd guess and say they may have smaller loans. Rather then sitting on 2.4 billion for between 5 and 10 years. Though I wouldnt put it past them to rank it for interest. (Each Dream class ship cost 1.2 billion per Bob Iger.Not the 950 million each as reported.Watched him say it in the same sentence as no new ships) Say 15 million for the inital r and d, say 50 million for a down payment and then the balance when the ships are delivered. Yould probably have a better handle on that then I do. I agree that Disney ultimately pays for it, there just not paying the whole cost up front. There doing it over time. If I understand this correctly.