Euro Disney stock up on creditor rescue

29th September 2004, Comments 0 comments

PARIS, Sept 29 (AFP) - Shares in theme park Euro Disney rallied strongly by 9.38 percent in early trading on Wednesday in relief that a roller-coaster ride to obtain creditor backing for rescue refinancing had ended safely.

PARIS, Sept 29 (AFP) - Shares in theme park Euro Disney rallied strongly by 9.38 percent in early trading on Wednesday in relief that a roller-coaster ride to obtain creditor backing for rescue refinancing had ended safely.  

One stock analysts here, who declined to be named, commented: "This is good news because it avoids Euro Disney filing for insolvency.  

"However, the share remains highly speculative. The situation is not at all clear and the cost of servicing the debt is enormous.  

"For investors to return to buying the stock, the management must reassure about group profitability which is one of the weak points in Euro Disney."  

The company, which operates a Disney leisure park, hotels and property interests east of Paris, has been unable for a year to meet debt payments and has had to extend several deadlines to win creditor backing.  

The price of the shares rose by 0.3 cents or 9.38 percent to EUR 0.35 on being re-quoted after suspension on Tuesday.  

The shares touched a high point of EUR 10.25 in 1992, the year that one of its two theme parks near here, Disneyland Paris, opened. But by 1994 it was in serious financial problems and negotiated a first debt restructuring with its creditors.  

The company, 39.0-percent owned by The Walt Disney Company, was theoretically at risk of bankruptcy until it won round the last creditors shortly before the latest deadline for a deal expired on September 30.  

Euro Disney, burdened with debt of about EUR 2.4 billion (USD 2.9 billion), said it had had agreed with its lenders a revised version of an agreement it had reached with its US parent and the French state financial institution Caisse des Depots et Consignations on June 8.  

But the changes required that interest on about EUR 450 million of senior debt would be increased by about two percentage points and that final payment on some senior debt would be extended to 2012 instead of a longer period to 2014.  

However the company had obtained permanent concessions on some subordinated debt of EUR 30 million.  

The agreement, effective from October 1, was subject to completion of a rights issue to raise EUR 250 million by March 31, 2005.  

One source close to the matter said that the negotiations had dragged on because investment funds which had bought debt from banks had taken a hard line.   Press reports had suggested that US speculative investment fund Black Diamond had been the last to sign, demanding an increase of interest paid on senior debt.  

Chairman and chief executive Andre Lacroix said that the agreement "is a significant step towards further developing the magic of Disneyland Resort Paris."  

Chief financial officer Jeffrey Speed said: "Once implemented, the agreement will provide significant liquidity, including measures intended to mitigate the adverse impact of business volatility, as well as capital to invest in exciting new rides."  

At brokers Fideuram Wargny, analyst Virginia Blin said that the basis of the financial restructuring was to extend the timetable for debt payments to give it time to put its operations on a sound footing.  

But the key was to increase the number of people visiting the park, she said.

 

© AFP

 

Subject: French News

0 Comments To This Article