Disney

Disney Company normally extends debt securities to the members of the public. It is known to give debt securities that are subordinated and also senior debt securities. Those debt securities that are provided to the members of the public by this media company can be issued together or separately once the exchange for or conversion of other various securities. The company’s debt securities can be junior subordinated, subordinated or senior subordinated and it should be considered that these debts may be issued in various series (Walt Disney,2016).The series of the debt securities may be one or more than just one series. This clearly shows that there is possible limit in every series of the securities. This simplifies the understanding of interested parties on the manner in which they are supposed to carry out the process of buying the debt securities. Through this, the marketing of securities is made very much simplified. Essentially, the firm’s supplement for security sales shows that they were issued in form of senior debt securities and which were under an indenture. The securities were placed in the category in a rank with other unsecured debts that are senior. The securities were due in the year 2013 and registered as Global notes with a rate of 4.5 %. For the purpose of successful marketability the company entered each of the issued notes into an entry book form or was entered into a definitive book and a global security was used to represent the note (The Walt Disney Company Annual report, 2008). The global security is deposited with Depository Trust Company and the name depository’s nominee was used to register it. Certain rules were also imposed and were intended for the issuance purpose. The company did not carry out the sale of the securities in the stock exchange but was done through floating on the secondary market. The agents were assured of indemnification against any liability that could accrue to the as per the Securities Act.  The approaches taken by the company made sure the availability of the securities to every potential investor who has an interest.  It was also made clear that the securities’ sales would be repurchased only when they have matured but gave the investor the option of redeeming them at the company’s terms and including the time Walt Disney’s decides. The terms were unfavorable so as to discourage the possibility of earlier redemption. The company also picked banks with high reputation to be their underwriters or agents. Such banks include Stern & Co., Bank of America Securities LLC, Barclays Capital Incl, and Bears among others. This ensured a highly effective distribution system that was handled competently. Moreover, an indenture for subordinated debt securities was made adopted for the purpose of issuance of those securities. The company also chose to address each of these indentures one at a time and specifically identifying every trustee (The Walt Disney Company Annual report, 2008).  

The Walt Disney’s debt amounted to one billion dollars. About $ 986,760, 000 was the proceeds to the organization while the earnings of the brokers would be 0.35 percent which was a part payment. The maturity was to be 13th December, year 2003. The company had no outstanding debts or commercial paper by October 2009. The debts for the commercial paper repurchased before the maturity date was due. The most probable reason would be that they were surrendered due to hard economic situations which were experienced during 2008-2009 periods. The Untied States economy was undergoing a negative growth at the moment, which was put at negative 8%. This made most of the investors were becoming uneasy with any investment and the events may have made many of them to consider an early repurchasing due to fear that the economic situation would continue deteriorating.

The company’s debt was $986,760,000 as mention earlier and was proceeds to the firm while part of the payment for brokers amounted to 0.35%.  This represents a decrease which can be attributed to the firm’s average performance in 2009 which improved in 2010. This performance made it possible for Walt Disney to pay back all the commercial paper debts. The net income for the year 2010 was $3963 million which shows a rise of 19.8 % from 2009 which was $3307. There was a decrease in the net income for the year 2009 by 25.3 % as compared to the previous period whose income was $4427. The adverse economic conditions resulted to this decrease in revenue (The Walt Disney Company Annual report, 2008). The inconsistency in energy price and cost of sustenance in such an environment represent a big threat to the company’s business activities. The slow economic growth was a major contributing factor in the net income reduction. This can be seen the case of all time low level of employment in the 2008-2009 period when negative economic growth was experienced. Like Walt Disney Co. many of the multinational firms were hard hit by the recession that was observed globally. The company’s relies heavily on the American economy which gave a weak link in the marketing approach adopted at the time. Change in behavior if the consumer is also another factor that specifically impacted the Studio Entertainment part of the company. The shift in behavior can be seen in the more sales on-demand pay TV from the sales of common DVD in addition to other digital mediums. After the netting of commissions and discounts, the percentage price of sale for Disney is thus 98.676 %. This is obtained by subtracting discounts and commissions’ percentages from the price of initial sales in percentage (The Walt Disney Company Annual report, 2008).

The proceeds from the sale of securities as provided in the prospectus were supposed to use in the general operations of the company. These purposes included the reduction of debts that were short-term, funding or expanding various investments, contributing to the company’s subsidiaries and financing any planned acquisitions. This would extend the market share for Disney which would translate to more sales and thereby increase the profitability level. The acquisitions approach has been known to be one of the best strategies for a company to grow its business level since the viability of acquired entities is proven; the company is bound to reap a lot (Hitt, Ireland, & Hoskisson, 2008). .The proceeds would also allow the firm to provide more credit so that it is able to offer such credit to the members of the public who would be interested .The funding of other projects as suggested and provided for in the supplement of the prospectus is also possible. Most of the proceeds were ploughed back into the business to enhance major acquisitions and financing major operations for expansion purposes. The prospectus’ largest portion of the securities’ sale was put into capital expenditure which included theme parks construction, resorts expansion, cruise ships, new rides and attractions. The concentration of most capital expenditure in the year 2010 consisted of California and Hong Kong Disneyland expansion, Vatican resort construction in Hawaii and the partial payment of two cruise ships that were new. The key capital expenditures such that happened in 2010 like the California Adventure and payment for cruise ships that were luxurious, were initiated and partially paid for in the year 2009.  In addition, there were investments in media network expansions and media and broadcast centers were also upgraded (The Walt Disney Company Annual report, 2008). The investments included also the improvement of information and technology abilities. This is seen in a key acquisition of the Playdom Inc and Marvel Entertainment which amounted to $ 2.5 billion. These acquisitions were partly subsidized when other investments were sold such as television service in the European region and various assets that were owned by Walt Disney Power Rangers. This means that all the funds gotten from the securities were utilized to the fullest. The company had to offload some of its assets in order to facilitate some of these expenditures when the securities’ sales proceed were no enough. The company does not have to be accountable for the funds since they were not sufficient to ensure the completion all of the activities to be undertaken (The Walt Disney Company Annual report, 2008).

In conclusion, the poor performance of Walt Disney in 2009 could be attributed to the expansion strategies introduced in 2008. In addition, expansion into emerging markets where some losses were incurred can also be a reason. The main contributing factor is, however, the 2008 financial crisis.

References