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Oct 3, 2017

Walt Disney sells $1.25B in first maple bond issue

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Walt Disney Co (DIS.N) sold $1.25 billion of seven-year senior unsecured Maple notes on Tuesday, the company's first issue in the Canadian-dollar denominated Maple bond market, which has seen a number of high profile deals in recent months.

The private placement deal, which was upsized from $750 million, was sold at a spread of 81 basis points over the Government of Canada curve. Guidance had been set at a spread of 84 basis points plus or minus 3 basis points.

The bond carries a 2.758 per cent coupon and matures on Oct. 7, 2024, but can be redeemed, at a cost, before maturity by the issuer.

"Investors are clearly holding their hands up high saying we love the diversification that these issuers are showing to us," said Brad Meiers, head of debt capital markets and syndication at HSBC Securities (Canada) Inc, which was one of the joint book-running managers.

AB InBev (ABI.BR), McDonald's (MCD.N) and Apple Inc (AAPL.O) have been among the blue-chip companies that have tapped the Maple bond market this year, in which foreign issuers sell Canadian dollar-denominated debt.

Apple issued a $2.5 billion seven-year deal in August, which set a record amount for an issuer in the Maple bond market and tied as the biggest corporate issue in Canada. It was priced at a spread of 80 basis points over the curve.

"For Canadian investors it makes a lot of sense because there has not been a lot of supply of non-financial CAD denominated investment grade debt issuance," said Geoff Castle, a portfolio manager at PenderFund Capital Management.

A Disney spokesman said the offering is part of its normal global funding efforts and proceeds will be used for general corporate purposes.

Foreign issuers often act opportunistically, issuing in the Canadian dollar denominated debt market when they can swap the proceeds into U.S. dollars and achieve a cheaper overall borrowing cost, market players say.

They could also be trying "to diversify their investor base across other currencies," said Aubrey Basdeo, head of Canadian fixed income at BlackRock.

"All issuers coming here do appear to have strong balance sheets, which makes it easier for investors to absorb these new issues," Basdeo added.

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