Zacks_Analysts' Blog : Disney Banks on Low Bond Rates - Analyst Blog

The global credit markets have recently undergone significant disruption creating difficulties for the companies to obtain financing at reasonable terms. However, the scenario is quite different for the U.S. blue chip companies, at least for now, as they can access cheap funding despite the turmoil.

Further, borrowing costs are within 60 basis points range from its record low of 3.45% in August, facilitating the companies to obtain easy financing at compelling terms.

Thus, to bank upon the low bond rates, The Walt Disney Company (DIS) sold bonds, Bloomberg reported. The issue marks the company’s third debt sale this year.

The company distributed the issue into two parts.  Disney issued $1 billion 0.875%, 3 year notes and $600 million of 4.125%, 30-year bonds.

Prior to it, Disney made a notable progress in expanding its footprints in Russia. The company announced that it has acquired 49% stake in Seven TV network from UTH Russia. Further, Seven TV will be branded as the Disney Channel.

Disney incurred $300 million to gain the above stake from Seven TV, a unit of Usmanov’s and Tavrin’s UTH Russia Ltd. Moreover, the company stated that it has closed the transaction on November 18, 2011.

According to Disney, it plans to mutually operate the broadcast network with UTH and start broadcasting a free-to-air channel in Russiaearly next year. Currently, the company through cable and satellite operators reaches about 5 million of the country’s 50 million family units. 

Despite difficult operating environment, the company did not change its strategies and remained focused in deploying its capital toward expanding its Parks and resorts business, and in turn, enhancing its markets and creating long-term growth opportunities.

Going with its strategy, Disney also intends to venture into Russian markets through its theme parks business.

Walt Disney is one of the world's leading diversified entertainment companies. Moreover, the company commands a formidable portfolio of globally recognized brands, primarily its namesake brand Walt Disney, followed by ABC, ESPN and Marvel Entertainment. These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like News Corporation (NWSA) and Time Warner Inc. (TWX).

Currently, we maintain a long-term ‘Neutral’ recommendationon the stock. Moreover, Disney’s shares has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating