Disney forfeits rights to save French park

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The Independent Online
WALT DISNEY ispreparing to make big sacrifices in an effort to keep the troubled Euro Disneyland theme park outside Paris alive.

The California-based movie group, which owns 49 per cent of Euro Disney, is believed to have offered to give up all its lucrative concession and royalty rights in the venture in an effort to appease angry bankers.

The hotels surrounding the park may also be hived off in an effort to overcome the current Fr20bn (pounds 2.5bn) financial crisis.

The concessions and royalties have been a source of resentment from the outset, and are now seen on this side of the Atlantic as an intolerable indulgence when Euro Disney is fighting for survival.

The royalties originally took three forms: a royalty of 10 per cent of admission revenues, 5 per cent of sales from souvenir, food and drink concessions in the park's shops and restaurants, and a 3 per cent management fee. The latter has already been waived 'until the park is profitable'.

The value of the royalties and concessions has in any case been devalued by the decision to cut prices - although the public has responded to the move with bookings at near capacity for December.

US Disney is not proposing to give away these rights for ever: they may become worth millions of dollars in the future. As with the management fee, the royalties will be waived only for the duration of the crisis, however it is defined.

The hotels may be placed at arm's length in a type of sale-and-leaseback arrangement with a recognised hotel operator. In return for these retreats, Disney will expect an easier ride on the refinancing of Euro Disney. The banks, which are mainly French but include Barclays and National Westminster, are understood to want to keep US Disney's stake at 49 per cent. 'That way we can be more sure of their continued commitment,' one source said.

Disney is reluctant to put more of its own money into the French theme park. Euro Disney requires up to pounds 1bn of new capital to address the massive interest bill it faces on the current debt mountain.

Both US Disney and bankers are increasingly turning to the French government for help. It has already lent pounds 500m at favourable rates.

The crisis is setting alarm bells ringing in other countries that might have previously welcomed Disney with open arms.

But Disney knows it must keep its friendships. It has plans on the drawing board - postponed for the foreseeable future - to erect another park next to Euro Disney. Europe's population of 350 million is potentially big enough to support a location in a second country. The US, with its population of 240 million, already has two and Disney has announced a new historical park in Virginia.

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