Walt Disney has come to the rescue of its loss-making subsidiary Euro Disney with a €1bn funding deal which could give the US group total control over Europe’s biggest tourist attraction.
The deal includes a rights issue and debt restructuring which will inject €420m in cash into the Euro Disney group and eliminate €600m of its debt owed to Walt Disney via an equity swap.
Euro Disney is currently 40% owned by Walt Disney and 10% by the Saudi prince AlWaleed bin Talal with the rights issue to raise €351m open to all shareholders but backed by Walt Disney, which will be required to make a tender offer for the whole company.
Twenty miles east of Paris, the resort has struggled amid the economic downturn in Europe, with attendances down by 700,000-800,000 visitors at just over 14m visitors in the last year.
At the same time its total debt of €1.75bn which is owed to Walt Disney has hampered its ability to invest in upgrades to the park.
The company said it estimates that revenue for the year just ended on September 30 fell by up to 3% to €1.27bn while earnings before interest, tax, depreciation and amortisation (EBITDA) dipped to €110-€120m from €144m and net losses rose to between €110-€120m from €78m.
“This proposal to recapitalise the Euro Disney Group is essential to improve our financial health and enable us to continue making investments in the resort that enhance the guest experience,” company president Tom Wolber said.
Under the plan, shareholders are to be offered nine new shares for every one held for €1 a share, raising €351m. The company said the rights offer price represented a 20% discount to Friday’s closing price, adjusted for the issuance of the new shares.
In addition, shareholders will have the option to buy some of the shares issued in the debt conversion at €1.25 a share to avoid diluting their stakes.
The company’s debt will fall to €998m, taking the company’s balance sheet from a negative equity position of around €200m at the end of September to positive equity of €800m.
AlWaleed bin Talal has not yet decided whether to subscribe to the share capital increase.
© Irish Examiner Ltd. All rights reserved