Barclays Global Investors in San Francisco unwound a credit-default swap on Walt Disney Co. last month after gaining a 20 basis point profit. Peter Freilinger, principal and head of the structured products group, said the firm bought five-year credit protection on the company following the Sept. 11 U.S. terrorist attacks because it correctly predicted spreads on Disney would widen. He added that the move was based on the assumption that the attacks would negatively impact the company's cash flow because of a drastic drop in visitors to Disney's theme parks.
The swap was priced at around 55 basis points, Freilinger said. The trade was unwound at about 75 bps. The notional size was USD10 million. Freilinger declined to comment on the counterparty to the deal, but added that BGI only works with counterparties that have a credit rating of A or higher.
In October,Fitch and Standard and Poor's lowered their ratings for Disney's unsecured debt to A minus from A, while Moody's Investors Service downgraded Disney's unsecured debt to A3 from A2.
