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Disneys Yen Financial

Essay by   •  December 6, 2018  •  Case Study  •  598 Words (3 Pages)  •  61 Views

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Walt Disney

1) Evaluate long-term financing instruments and strategies for your selected organization (Walt Disney).

2) Devise the optimal capital structure for your selected organization (Walt Disney) in light of current, business, economic, and industry trends.

3) Estimate the firm's cost of capital, price per share, and market value based on its optimal capital structure that you have devised.

Walt Disney has $11,110 millions long term borrowings to finance there asset and a total of $30.17 million of total debt as per its financing decision.

Its long term borrowings include:

Commercial Paper

The company had $2.0 billions of commercial borrowings in its long term debt and a total of $4.5 billion of commercial paper can be facilitated by the bank for the company with half of it is going to expire in 2010 and the other half in the year 2011.These commercial paper borrowings will cost the company at LIBOR based rates plus spread depending on the company credit rating. Apart from this the company has a capacity to issue up to $800 million of letters of credit that is going to expire by the year 2011.

U.S. Medium-Term Note Program

The company has a total of $7.0 billion debt outstanding under US medium term notes and its maturities range from 1 to 85 years and stated interest rates range from 3.47% to 7.55% on the borrowing under this instrument..

European Medium-Term Note Program

Company has issued European medium term notes of $318 million. The company had a European medium-term note program that allow the company to issue various types of debt instruments such as fixed or floating rate notes, redeemable notes, U.S. dollar or foreign currency denominated notes, and index linked or dual currency notes as per there financing program. The total size of the program is $4 billion i.e. the company can raise funds upto $4.0 billion under this program. After issuance of $318 million the company has remaining capacity of $3.7 billion.

Other Foreign Currency Denominated Debt

Company had issued $825 million from other foreign currency denomination debt. At present the company has raised funds in Canadian dollar and Japanese yen. Under the credit agreement in Canadian dollar the company raised CAD$328 million of borrowings that bears interest at CAD LIBOR plus 0.225% and has a maturity till 2013. Whereas under the credit agreement in Japanese yen the company raised JPY54 billion of borrowings that bears an interest rate at Japanese LIBOR plus 0.42% and has a maturity till 2013.

Also the company has raised funds of $178 million, $248 million and $374 million under Capital Cities/ ABC Debt, film financing and other different modes respectively. Also the company has raised it debt of $3.7 billion as Euro Disney and Hong Kong Disneyland.

Capital Structure:

If we look at the financing decision of Walt Disney, we can say that the company has financed its asset with 37.69% of long term debt. Whereas it’s total debt in the company financing decision includes 44.27%. As far as current, business, economic and industry trends are concerned we can say that the company has its capital structure almost similar to its industry. We can find that at present in media-diversified industry has a capital structure of 54% debt and 46% equity. But based on the current economic condition a bit lower debt with 44% debt and 56% equity is a better option for the company.

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