Walt Disney, Banks Agree to Rescue Euro Disney for Second Time
June 9 (Bloomberg) -- Walt Disney Co. and three French banks agreed to bail out Euro Disney SCA for the second time in a decade in a package that prevents Europe's biggest theme park operator from defaulting on $2.9 billion of debt.
Euro Disney, which is 39 percent owned by its U.S. parent, would sell new stock under the plan. The accord needs to be approved by creditors holding more than half of the debt, said Pieter Boterman, a spokesman for the company. Euro Disney shares rose as much as 5.7 percent.
Chief Executive Andre Lacroix has been seeking a reprieve from banks since August, when losses triggered by the opening of a second, 610 million-euro ($742 million) theme park and a travel slump caused Euro Disney to breach the terms of its loans. Walt Disney previously helped keep its affiliate afloat by foregoing royalty fees between 1994 and 1998.
``This is a first step, but a lot of work remains to turn around the company,'' said Julien Batteau, an analyst at fund management firm Richelieu Finance in Paris. ``Walt Disney seems to be giving support, which is important.''
The company may sell 250 million euros of new shares, including 100 million euros of stock to Walt Disney, French newspaper Les Echos reported last month.
Medieval Castle, Golf Course
Walt Disney Chairman Michael Eisner has had to settle Euro Disney's financing plans this year while fending off a $54 billion hostile bid for the second-largest U.S. media company, as well as claims by former board members that he'd mismanaged the Burbank, California-based company.
Still, Walt Disney will probably continue to support its French affiliate, investors said.
``This is Walt Disney's shop window in Europe,'' said Kilian de Kertanguy, who helps manage 1.2 billion euros at Cholet-Dupont Gestion in Paris and held stock in Euro Disney earlier this year. ``They wouldn't want to leave it in a poor financial health.''
Credit Agricole SA and BNP Paribas SA, France's two biggest banks, and state-owned lender Caisse des Depots et Consignations are the key creditors who have reached the current accord with Euro Disney and Walt Disney.
Euro Disney shares rose 1 cent, or 2.9 percent, to 36 cents at 12:26 p.m. in Paris. The stock, which closed as high as 10.25 euros in March 1992, fell to a record 31 cents on Friday amid concern the company may not reach an agreement with its banks.
July Deadline
The agreement ``embodies the essential elements for Disneyland Resort Paris to pursue its long-term growth strategy, including capital for asset additions,'' Euro Disney Chief Executive Andre Lacroix said in a faxed statement.
Creditors holding a majority of the company's debt must waive the terms on Euro Disney's existing borrowings by June 30 for the company to remain solvent. Lenders and shareholders must then approve the agreement by July 31 for the plan to take effect.
Euro Disney's main business is running Disneyland Paris, which includes a mock medieval castle, restaurants and amusements such as a roller coaster based on film character Indiana Jones. The company also operates Walt Disney Studios, a movie studio- themed park next door that targets older guests, as well as hotels, golf courses and conference centers.
Four CEOs in Six Years
Lacroix, 44, who became Euro Disney's fourth chief executive in six years in March 2003, has been seeking ways to improve sales and stem losses. Higher admission prices and spending per visitor boosted theme-park revenue by 6 percent in the first half ended March 31. Total sales were unchanged at 474 million euros.
Euro Disney's debt problems stem at least in part from the Walt Disney Studios park, which it opened in March 2002. The park has failed to attract enough visitors to help Euro Disney meet its debt payments.
Losses after the opening of the first theme park led to a restructuring at Euro Disney in 1994 that included a royalties waiver from Walt Disney. As part of that restructuring, Euro Disney brought in Saudi Prince al-Waleed bin Talal as a shareholder. Al-Waleed owns about 16 percent of the company.
Euro Disney turned its first profit in fiscal 1995. The company remained profitable for the next six years, attracting more than 13 million visitors annually.
Costs related to the new park led to losses for fiscal 2002 and 2003. Euro Disney's loss widened to 109 million euros in the six months through March 31 from 82.7 million euros.
June 9 (Bloomberg) -- Walt Disney Co. and three French banks agreed to bail out Euro Disney SCA for the second time in a decade in a package that prevents Europe's biggest theme park operator from defaulting on $2.9 billion of debt.
Euro Disney, which is 39 percent owned by its U.S. parent, would sell new stock under the plan. The accord needs to be approved by creditors holding more than half of the debt, said Pieter Boterman, a spokesman for the company. Euro Disney shares rose as much as 5.7 percent.
Chief Executive Andre Lacroix has been seeking a reprieve from banks since August, when losses triggered by the opening of a second, 610 million-euro ($742 million) theme park and a travel slump caused Euro Disney to breach the terms of its loans. Walt Disney previously helped keep its affiliate afloat by foregoing royalty fees between 1994 and 1998.
``This is a first step, but a lot of work remains to turn around the company,'' said Julien Batteau, an analyst at fund management firm Richelieu Finance in Paris. ``Walt Disney seems to be giving support, which is important.''
The company may sell 250 million euros of new shares, including 100 million euros of stock to Walt Disney, French newspaper Les Echos reported last month.
Medieval Castle, Golf Course
Walt Disney Chairman Michael Eisner has had to settle Euro Disney's financing plans this year while fending off a $54 billion hostile bid for the second-largest U.S. media company, as well as claims by former board members that he'd mismanaged the Burbank, California-based company.
Still, Walt Disney will probably continue to support its French affiliate, investors said.
``This is Walt Disney's shop window in Europe,'' said Kilian de Kertanguy, who helps manage 1.2 billion euros at Cholet-Dupont Gestion in Paris and held stock in Euro Disney earlier this year. ``They wouldn't want to leave it in a poor financial health.''
Credit Agricole SA and BNP Paribas SA, France's two biggest banks, and state-owned lender Caisse des Depots et Consignations are the key creditors who have reached the current accord with Euro Disney and Walt Disney.
Euro Disney shares rose 1 cent, or 2.9 percent, to 36 cents at 12:26 p.m. in Paris. The stock, which closed as high as 10.25 euros in March 1992, fell to a record 31 cents on Friday amid concern the company may not reach an agreement with its banks.
July Deadline
The agreement ``embodies the essential elements for Disneyland Resort Paris to pursue its long-term growth strategy, including capital for asset additions,'' Euro Disney Chief Executive Andre Lacroix said in a faxed statement.
Creditors holding a majority of the company's debt must waive the terms on Euro Disney's existing borrowings by June 30 for the company to remain solvent. Lenders and shareholders must then approve the agreement by July 31 for the plan to take effect.
Euro Disney's main business is running Disneyland Paris, which includes a mock medieval castle, restaurants and amusements such as a roller coaster based on film character Indiana Jones. The company also operates Walt Disney Studios, a movie studio- themed park next door that targets older guests, as well as hotels, golf courses and conference centers.
Four CEOs in Six Years
Lacroix, 44, who became Euro Disney's fourth chief executive in six years in March 2003, has been seeking ways to improve sales and stem losses. Higher admission prices and spending per visitor boosted theme-park revenue by 6 percent in the first half ended March 31. Total sales were unchanged at 474 million euros.
Euro Disney's debt problems stem at least in part from the Walt Disney Studios park, which it opened in March 2002. The park has failed to attract enough visitors to help Euro Disney meet its debt payments.
Losses after the opening of the first theme park led to a restructuring at Euro Disney in 1994 that included a royalties waiver from Walt Disney. As part of that restructuring, Euro Disney brought in Saudi Prince al-Waleed bin Talal as a shareholder. Al-Waleed owns about 16 percent of the company.
Euro Disney turned its first profit in fiscal 1995. The company remained profitable for the next six years, attracting more than 13 million visitors annually.
Costs related to the new park led to losses for fiscal 2002 and 2003. Euro Disney's loss widened to 109 million euros in the six months through March 31 from 82.7 million euros.
