August 18, 2011 / 7:28 PM / 8 years ago

IFR-Disney cleans up in US bond market with coupon records

NEW YORK, Aug 18 (IFR) - The Walt Disney Company hit the market with a bond offering on Wednesday and ended up achieving the lowest ever coupons for bonds with maturities of five, 10 and 30 years.

It’s a sign of the times. The market was ripe with possibility when the A2/A/A rated issuer went out to investors yesterday. Treasuries all week have been trading near all time lows. In fact, what has drawn Disney (DIS.N) and this week’s other issuers to market is not necessarily a strong need for cash. The main allure is the ultra-low rates, and credit spreads for top-notch credits have snapped tight.

“Credit spreads on highly coveted names like Walt Disney are back at or close to their tights of the year; we’ve hit new lows across the Treasury curve, new issue concessions have abated and there is a cash-rich investor base,” said Jonathan Fine, managing director and head of investment grade debt syndicate in the Americas at Goldman Sachs. “When you have a confluence of these events issuers are going to break some records.”

Disney printed a US$750m offering of five-year notes with a 1.35% coupon at 99.206 to yield Treasuries plus 60bp. The coupon bests the 1.375% record held by Colgate Palmolive Co (CL.N) since October 29 2010. The US$750m 10-year finished with a 2.75% coupon at 98.717 to yield plus 72bp, beating out the 2.95% coupon achieved by Johnson & Johnson (JNJ.N) on August 12 2010 and matched by Colgate on October 29 2010.

Meanwhile, Disney’s US$350m 30-year tranche printed with a 4.375% coupon at 99.01 to yield Treasuries plus 87.5bp. J&J also set the previous 30-year record of 4.50% on August 12 2010. A handful of other issuers tied that level soon thereafter, including Microsoft (MSFT.O), San Diego Gas & Electric and Southern California Edison. Most recently Southwestern Public Service Co priced a 4.50% long bond on August 3 2011.

Disney was clearly what a lot of investors were looking for this week.

“You have to be able to check a number of boxes at the moment to get this type of execution in the new issue market: you need to be well known, Single-A or better and non-financial. If you are all of these things then you are ripe for a phenomenal offering,” said Fine.

Disney has always been at the forefront of financing trends. Most noticeably, it was the first corporate issuer ever to print a 100-year bond, when it priced a US$300m fundraising on July 21 1993. That started a trend among certain high-grade issuers that re-emerged over the past year, most recently with a US$300m century bond from University of Southern California that priced on August 10 2011.

Disney’s last trip the high-grade bond market was on May 18 this year. The difference between the Wednesday trade and the May deal had more to do with the changes in the Treasury market than in Disney.

The issuer printed a US$500m offering of 10-year notes in May with a 3.75% coupon, a full percentage point richer than Wednesday’s trade. However, from the point of view of spread it was a more attractive deal for the company. Last time it achieved 60bp over Treasuries compared to 72bp on Wednesday.

Reporting by Timothy Sifert; Additional reporting by Danielle Robinson and Andrea Johnson

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