Disney Turns To The Debt Market; Raises $6 Billion
Someone else will have to tell me the real significance, but it’s interesting to note that Disney turned to “the debt market” to raise $6 billion.
Disney In The Debt Market
The company registered five different notes, set to mature between 2025 and 2050, with values of between $500 million and $1.75 billion, and interest rates between 3.35 percent and 4.7 percent.
In the filing, the company says it intends “to use the net proceeds from the sale of the notes for general corporate purposes, including the repayment of indebtedness (including commercial paper).” In other words, it may use the new offering to pay down other debt obligations. The company had long-term debt totaling more than $38 billion at the end of its last fiscal year.
The company signaled its intent to raise fresh cash in a filing with the SEC on Thursday. It also released a note to investors warning about the impact the novel coronavirus is having on its business, including disruptions to its sports and creative content, the closure of its theme parks, and lower advertising sales.
So what is the “Debt Market” as opposed to the “Equity Market”?
- Debt market and equity market are broad terms for two categories of investment that are bought and sold.
- The debt market, or bond market, is the arena in which investment in loans are bought and sold. There is no single physical exchange for bonds. Transactions are mostly made between brokers or large institutions, or by individual investors.
- The equity market, or the stock market, is the arena in which stocks are bought and sold. The term encompasses all of the marketplaces such as the New York Stock Exchange (NYSE), the Nasdaq, and the London Stock Exchange (LSE), and many others.
- The equity market is viewed as inherently risky while having the potential to deliver a higher return than other investments.
That risk seemed to pay off this time around.
Tough Week On Wall Street
However, after yesterday’s SEC filing citing a change in the market, today Disney had a heck of a day on the market.
I posted about Disney’s warning regarding changing consumer behavior for DisneyBuzz:
There’s a famous curse stating, “May you live in interesting times…” And, unfortunately, these are VERY interesting times for The Walt Disney Company (and pretty much everyone on the planet).