No fairytale ahead for Euro Disney

1st December 2004, Comments 0 comments

PARIS, Dec 1 (AFP) - Euro Disney is pressing shareholders to approve much-delayed crisis funding of EUR 250 million, while making clear they can expect a rough ride of losses for several years.

PARIS, Dec 1 (AFP) - Euro Disney is pressing shareholders to approve much-delayed crisis funding of EUR 250 million, while making clear they can expect a rough ride of losses for several years.

In a letter posted on the company Internet site before a shareholders' meeting on December 17, chairman Andre Lacroix said Euro Disney "anticipates that it will record net losses for at least the next several years".

The company has spent much of this year in tough talks, missing several deadlines, to win creditors' approval to overcome a cash crisis which had interrupted payments to bond holders.

Lacroix is now appealing to shareholders to approve a capital increase of EUR 250 million (USD 330 million), along with the annual accounts and a legal reorganisation.

In midday trading on the Paris stock exchange, Euro Disney shares were unchanged at EUR 0.27, while the CAC 40 index was up 0.50 percent overall.

The theme park, which has boosted a formerly rural area east of Paris, has not been a success for its US parent company, having had to restructure its finances twice since being launched in the early 1990s.

Although it has made a high profile impact, it was hit early on by problems over construction contracts and French labour laws, and has had trouble raising the numbers of people attending, and the amounts they spend.

The numbers of expected German tourists, for example, has been disappointing and damp winter weather in the Paris region has also been a problem although the park has turned the Christmas-New year period into an attraction.

Lacroix acknowledged in the letter that in 2004, "for the second year in a row, our financial results were disappointing".

The group announced on November 9 that its net loss had more than doubled to EUR 145.2 million in the 2003-2004 fiscal year from EUR 58.3 million in the previous period.

It is also burdened with EUR 2.4 billion in debt.

Following a debt restructuring deal reached in September, "the group will benefit from a substantial improvement in its cash position", the shareholder's letter said.

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

Euro Disney's operating margin has been affected however by a resumption of full royalty payments and management to The Walt Disney Company that had been waived in the last three quarters of fiscal year 2003.

Next year, part of an expected increase in sales will go towards higher costs arising from a rise in the French minimum wage, and towards offsetting a loss of subsidies connected with adoption of the country's 35-hour work week, the group said.

Disney also plans to spend EUR 130 million in 2005 to update its Space Mountain ride and on three new attractions scheduled to open in fiscal years 2006-2008.

The latest restructuring plan was designed to free up funds for the needed investment, but was subject to completion of the EUR 250 million rights issue by March 31, 2005.

Now, the group warned that attendance, which has remained weak both at Euro Disney and the neighbouring Walt Disney Studios Park could be affected by factors such as oil prices and "geopolitical considerations".

In addition, it said the state of the European and French tourism market, as well as weather conditions, would bear on its prospects for success.

© AFP

Subject: French News

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