Disney to Back Paris Theme Park’s $1.25 Billion Refinancing PlanMarie Mawad and Julie Miecamp
Walt Disney Co. is injecting money into Disneyland Paris in a bid to revive the 22-year-old theme park that’s struggling with waning attendance and mounting losses.
Euro Disney SCA, the resort’s operator, said it plans a 1 billion-euro ($1.25 billion) refinancing backed by its U.S. parent. Walt Disney, which owns about 40 percent of the French company, is required to make an offer for all Euro Disney shares as a result of the recapitalization.
Disney continues to support Disneyland Paris after years of losses at the theme park, hurt as Europe’s faltering economy weighs on consumer spending. The resort, created in 1992 in a suburb south-east of the French capital, is forecasting attendance to drop by as many as 800,000 visitors this year.
“This recapitalization plan would improve Euro Disney Group’s financial position and enable it to continue investing in the guest experience,” Burbank, California-based Walt Disney said in its statement. “We are demonstrating The Walt Disney Company’s continued confidence in Disneyland Paris.”
Euro Disney shares fell as much as 22 percent and lost 8.7 percent to 3.16 euros at 3:44 p.m. in Paris, valuing the company at 123 million euros. Walt Disney rose 0.6 percent to $88.96 in New York, valuing the company at $153 billion.
The refinancing includes a capital increase of about 420 million euros made or backed by Walt Disney and the conversion of 600 million euros of debt owed to its U.S. parent into Euro Disney shares. The offer for all Euro Disney shares by Walt Disney isn’t voluntary and is part of the plan only because it would be required as a result of its increasing stake, Euro Disney said.
Euro Disney said its net loss will probably widen to as much as 120 million euros this year from 78 million euros the previous period, while sales will decline as much as 3 percent.
“This recapitalization is essential to reinforce the financial solidity of Euro Disney and allow the group to continue investing in its park,” Tom Wolber, a Euro Disney executive, said in the statement. “A bad economic environment and heavy debt have impacted revenue and cash.”
As part of the refinancing, Euro Disney plans to consolidate all its debt maturing 2014 to 2018 into a single 350 million-euro revolving credit facility due in 2023. Regular repayments on loans granted by Walt Disney will be deferred to allow the company to pay back the debt when it matures in 2024.
If the proposal is implemented, Euro Disney’s debt would shrink to 998 million euros from 1.75 billion euros, while its ratio of debt to earnings will fall to about 6 times from about 15 times, it said.
This isn’t the first recapitalization plan at Euro Disney. Walt Disney two years ago provided 1.33 billion euros in financing to restructure debt at the French business.