DISNEY BOND SALE BREAKS RECORD.

Byline: Robert Hurtado The New York Times

Walt Disney Co. sold $2.6 billion in debt Friday, the largest bond offering ever by a top-grade company.

Demand for the Disney bonds was so strong that the size of the offering was sharply increased twice over the last two days. Disney had originally planned to sell $1.5 billion of bonds but increased the sale to $2 billion on Thursday and to $2.6 billion Friday. The sale drew buyers away from the Treasury market, where prices were lower in light trading.

Disney is "a name people would love to have in their portfolio," said Tom Davidson, a bond salesman for BA Securities Inc. "A name that doesn't come to market often."

The strong demand confirmed Disney's high standing on Wall Street. Despite taking on a huge amount of debt for its $19 billion acquisition of Capital Cities/ABC, analysts and money managers remain enamored of the company's cash flow.

Disney's balance sheet, many analysts say, is much stronger than those of other media companies like Time Warner Inc. or News Corp.

Disney's stock also rose Friday, closing at $64.875, up 37.5 cents on the day.

The Disney debt offering was split equally between 5-year and 10-year notes and was priced through the joint lead managers Merrill Lynch International and CS First Boston Ltd. Disney plans to use the proceeds to help finance the cash portion of the Capital Cities/ABC acquisition.

Disney initially raised the cash for the Capital Cities deal last week, selling $8.6 billion of commercial paper, with plans to refinance about half of the commercial paper with longer-term debt. Friday's bond offering was the first installment of the refinancing.

The sale was larger than the previous biggest investment-grade offering of $1.2 billion of IBM bonds in 1993, according to Securities Data Co. of Newark, N.J., a market research firm. But both offerings are dwarfed by the $4.1 billion in junk bonds - or bonds with ratings below investment grade - issued by RJR Holdings as part of its leveraged buyout in 1989.

The 5-year Disney notes were priced at par to yield 6.375 percent, or 35 basis points - or hundredths of a percentage point - more than a comparable 5-year Treasury note. The 10-year Disney notes were priced at at 99.855 to yield 6.77 percent, or about 47 basis points more than a comparable 10-year Treasury note.

The bonds were sold simultaneously in the United States, Europe and Asia. The securities are rated A2 by Moody's Investors Service and A by both Standard & Poor's and Duff & Phelps Credit Rating. Those ratings are several notches above speculative grade, meaning they carry some risk for investors but not a great amount.

While some traders said the prices of the Disney securities were a bit high, they were still impressed by the demand.

But that demand was apparently not as strong in Europe as it was in the United States and Asia. According to calculations by Bloomberg Fair Market, the Disney five-year notes were selling in Europe at a yield of about 6.36 percent, or 11 basis points below yields of 6.47 percent for a comparable security that pays interest in Eurodollars, or dollars held by European banks.

In the Treasury market, prices were lower in light trading.

"No economic data, and Tuesday's pending Federal Open Market Committee meeting kept many positions close to home," said Eric Hamilton, senior fixed-income analyst at Technical Data of Boston, referring to the Federal Reserve Bank's chief interest rate panel.

The price of the 30-year Treasury bond fell 8/32, to 91 23/32. Its yield, which moves in the opposite direction from its price, rose to 6.64 percent, from 6.61 percent Thursday.

Robin Mesch, fixed-income analyst at Thomson Research in Boston, said that with little or no fundamental data to give it direction, Friday's trading in Treasury futures was technically driven. Few investors sought to hold long positions ahead of the weekend.

The June contract closed Friday at 111 28/32. Friday's expiration of April Treasury bond options, she said, did not add any volatility to the session.