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Debt Mountain: The Walt Disney Company agrees €1.3 billion Euro Disney refinancing

Tuesday, 18th September 2012 at 23:32 by
Anthony
5 Comments

Time to shoot for the moon again?

It’s not the rumoured share buyout, but it’s big: Euro Disney S.C.A., operating group of Disneyland Paris, tonight announced that a huge €1.3 billion of its epic debt pile will be refinanced by The Walt Disney Company itself, taking over from the banks which have stunted the resort’s growth. Given a longer lending term, less restrictive financial commitments and reduced interest payments, Disneyland Paris will be free to invest more in long-term growth and enjoy greater operational flexibility.

Rumours on the pages of TIME Business first suggested in August that The Walt Disney Company could be considering a complete buyout of the Euro Disney group, of which it currently owns just under 40%. Today’s deal is a different prospect entirely yet could still be one of the defining moments in the resort’s history. Saddled with debt since opening in 1992, Disneyland Paris has struggled to expand enough to fuel growth while keeping up debt and interest repayments. For The Walt Disney Company, this has left a hole in its finances where royalties from the European resort, frequently waived due to lack of funds, should have flowed in.

By effectively becoming Euro Disney’s primary lender, Disney will take on the financing of a vast pile of debt but will now be able to set more manageable terms for repayment, finally easing the resort’s cashflow into a timeline that can hopefully allow for real growth alongside repayments. That means the resort could more easily gather the funds, for example, to see Walt Disney Studios Park reach its potential as a true second gate, or expand its hotels to reap revenues from now-booming demand.

Today, the Supervisory Board of Euro Disney Associés S.C.A. met to approve the deal, which is expected to be completed on 27th September 2012, just in time for the end of the company’s financial year. The maturity date of the debt will be extended to 2030, while interest payments will be reduced by €45 million over the next five years alone. €217 million principal debt will be repaid over that period, allowing for €225 million in additional cash flow. Now enough for a Disney California Adventure-style expansion blowout, but enough to make a difference to the operation and expansion of the resort.

The Walt Disney Company’s royalty agreement with the group will remain the same under the deal, which will incur some €30 million in financial charges. As of 30th September 2012, the Euro Disney group will have a total debt mountain of €1.71 billion.

“This refinancing will enable us to reduce our financing costs and give us greater investment and operational flexibility. This is a key step in the development of our Resort that we pursue for the benefit for all of our stakeholders. I strongly believe this will be highly beneficial to the Company, its cast members and shareholders.”, commented Philippe Gas, Chief Executive Officer of Euro Disney S.A.S.

Philippe Gas added: “The Walt Disney Company, with this transaction, reaffirms its continued confidence in Disneyland Paris which has successfully become, over the past 20 years, the number one tourist destination in Europe, a growth driver of French tourism and an important ambassador of the Disney brand across Europe.”

VIA Disneyland Paris Corporate (PDF)

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Comments (5)

  • This is fantastic news for DLRP. Let’s hope this brings brilliant new things for the years to come.

  • This is great news !! Hopefully DLRP will have the required funds and flexibility to invest further in the WDSP making it bigger … And also the funds to invest in Splash mountain, star tours 2 and Evarist …

  • Lets hope this helps the Walt Disney Studios Park expand at a regular 2 year intervals rather than a gap of 4 years every few years.

  • Lets hope the refurbs are vastly improved now too…..

  • Let’s hope so. When I first saw the picture of Space Mountain I thought a refurbishment of Space Mountain has been “granted”. Hopefully it would be an upgrade/conversion back to “De la terre a la lune” :-)

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