The Walt Disney Company’s Yen Financing

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Case #3 The Walt Disney Company’s Yen Financing In the early 1980’s, Disney opened a theme park in Tokyo Japan. It was operated by an unrelated Japanese company to Disney and Disney was receiving royalties in the form of the Yen. Rolf Anderson foresaw that there could be a possible exposure to Yen-Dollar exchange risk due to the increasing royalties received in Yen because of the theme park growth. Given the recent depreciation of the yen to the dollar, he was considering different ways to hedge this exposure. There were many ways to hedge that were considered by Anderson, such as options, futures, forwards, and swaps. Anderson was also pondering on a hedging method by issuing ten-year ECU Eurobonds with a sinking fund that would then be swapped into a yen liability. The Walt Disney Company provides an array of diversified products and services. They include operating recreational and entertainment complexes, producing motion pictures and television programs, controlling real estates and hotels, and selling consumer products. The company was founded in 1938 succeeding Walt Disney’s animated cartoon features such as Mickey Mouse and Donald Duck. The company since then has built amusement park in California, Orlando, Tokyo, Paris, and Hong Kong. Within each theme park, there exist different themes and sub parks that emphasises on different themes. The Disneyland park which opened in 1983 in Tokyo is operated by a non-related company and its revenue pays out royalties to Disney. Disney produces motion pictures, mostly of the animated variety, but they also made many television programs. In Florida, Disney, through its subsidiary, built many resorts and home communities. Along with these communities, Disney also developed commercial and industrial properties such as shopping centers to supplement the entire Disney experience. With all these revenues, Disney
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