The Walt Disney is pondering its options for a return to Wall Street to raise another $400 to $500 million for film production.

While the studio has successfully tapped the market in the past, some investment bankers say the trick this time will be for Disney to convince buyers that the success of “The Santa Clause” was not a fluke. The company’s recent live-action films, the only Disney pix open to outside investors, have generally performed poorly.

Disney is considering making another issue of securities known as senior participating notes to raise between $400 million and $500 million, according to sources close to the company. Co. Planning for the issue is still in its early stages. Disney is understood to have had only one meeting so far with the issue’s likely underwriter, First Boston Corp., and one source said the company has yet to decide on the details of the capital raising.

No pressure

One person close to the company said Disney was under no pressure to finalize an issue as it was still releasing films financed under past public issues.

The company has made two other issues of the same type in the past two years, raising $400 million in 1993 and $475 million earlier this year. Sources say the next issue would raise in the same range. Both those issues restricted investors to participation in live-action films, rather than Disney’s animated features.

Disney is expected to maintain the policy for the issue now being planned, saying in an SE C filing last month that in the future, the company will continue to seek partners that will share the risks and rewards of its live-action film business.

This policy meant investors in the two past issues missed out on big returns from Disney’s hit animated features “Aladdin” and “The Lion King.” Except for “The Santa Clause,” Disney’s recent live-action films haven’t done nearly so well.

Disney is expected to market the upcoming issue by pointing to “Santa” as proof it can produce hit live-action films. The studio is also expected to tout the skills of new studio chief Joe Roth.

Some bankers and analysts say the poor performance of Disney’s live-action films could, however, hurt the company’s ability to raise funds from outside investors again.

“I think they will have problems because of their track record,” said one banker.

“If I was them I wouldn’t do it,” said a rival executive. “The Disney name has tremendous panache in the marketplace but I think some of that has come off the rose.”

Disney’s willingness to risk its brand name is particularly sensitive because it is the one studio that has managed to keep tapping the public markets for film financing in recent years.

Investment banking sources say that most investors have been reluctant to put money into film financing since the de mise of tax-effective film partnerships in 1986, although Japanese and some European partnerships raised money for some studios in the late 1980s and early ’90s.

Writeoffs attractive

One banker said investors remember that the partnerships did not make much money, but added they forget about the tax writeoffs.

Bankers and analysts agree that Disney’s brand name is the factor giving it the edge.

“Disney has a very good name and an extremely well-respected management team that will give you good pricing,” said one banker. He said that despite all the company’s recent problems, there is still a very credible story there.

Merrill Lynch analyst Jessica Reif said that each of Disney’s public issues has become progressively less attractive for investors.

Mouse’s strengths

Reif observed in a recent report on Disney that the company was excellent at laying off financial risks on its partners. Reif said the note issues of the past two years dramatically limit Disney’s exposure, with minor limits on its upside.

The past two note issues were structured so that payment of part of the interest component of the securities was dependent on the performance of Disney’s live-action films. Disney said in last week’s SEC filing that this was a unique feature of the securities.

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