Euro Disney in debt deal with main lenders

Published on Thursday 10 June 2004 12:51

THEME PARK operator Euro Disney said it had reached a preliminary agreement with its main lenders on a vital restructuring plan.

The cash-strapped group, which is the European arm of the Walt Disney empire, said the deal would allow it to reshape existing debt and raise new debt and equity.

Euro Disney, which is struggling under a 1.46 billion debt pile said in November it was unable to honour the obligations on its debt and was entering negotiations with its lenders. Waivers from the banks and Disney - which owns 39 per cent of the firm - allowed the company more time to pull off a life-saving overhaul.

But apart from announcing that it had reached an agreement with its backers, the operator of Disneyland Paris - the most visited tourist attraction in Europe - gave no financial details of what the draft deal involved.

It only said that it would pave the way for a restructuring of its financial obligations and would involve new debt and equity.

"These transactions are intended to enhance the company’s liquidity and provide capital for the company’s ongoing business as well as investment in new park attractions and other resort assets," it said in a statement.

Chairman and chief executive Andre Lacroix, who ran the international operations of US fast food chain Burger King before moving to Euro Disney last year, said that additional details on the restructuring and investment plans would be given "in the near future".

While the proposal has been approved by the Walt Disney Company, French state-owned bank CDC and a steering committee of other lenders, it still needs the approval of all Euro Disney lenders by July 31.

Euro Disney said that if such approval was not obtained, and in the absence of any further waivers, the Walt Disney Company and the company’s other lenders "would be able to demand immediate payments from the company for amounts owed, which the company would not be able to satisfy".

One source close to the deal said there was little reason to expect approval would not be granted.

"We have agreed how the company will communicate with the banks in future, and what indicators the banks will use to follow the company," the source added.

Euro Disney has been squeezed by a slowdown in tourism that coincided with the costly opening of a second park, the Walt Disney Studios, which failed to draw the hoped-for crowds. That left the firm in the red and unable to service its massive mountain of debt.

However Virginie Blin, sector analyst at brokerage house Wargny, warned that the proposed restructuring deal was only a first step towards setting the company back on track.

"People are focusing on the financial restructuring but there are more fundamental problems," she said. "The most important thing is for them to find an operational solution for developing their second theme park."

The current negotiations constitute the second financial restructuring at the theme park operator in a decade. It was first forced to restructure in 1994 when property prices collapsed, eliminating a key plank of its business plan to raise funds by selling surrounding land.