Euro Disney saved by pounds 1bn refinancing

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EURO DISNEY, the troubled theme park near Paris, was yesterday pulled back from the brink of closure by a Fr10bn-plus ( pounds 1.15bn) refinancing deal hammered out between its bank lenders and Walt Disney in the US.

The plan, recommended by the joint steering committee of the leisure group's banks, requires the agreement of the company's 60-plus lenders and is designed to ensure the long-term viability of the resort. Walt Disney had threatened to close the park at the end of the month unless agreement on a restructuring was reached. Euro Disney shares fell 28p to 390p.

The proposals were announced as 400 small shareholders in Euro Disney gathered at the park for the annual general meeting to hear executives explain the resort's large losses in its first two years of operations. The unexpected news of the rescue plan took the steam out of many of the investors' complaints.

The refinancing will halve Euro Disney's pounds 2.2bn debt mountain, with the burden spread equally between the banks and Walt Disney. There will be a Fr6bn rights issue, 51 per cent underwritten by the lenders and 49 per cent by Walt Disney.

The banks will write off about 18 months' worth of interest and defer principal payments, while Walt Disney will waive royalties and management fees for five years. In addition, the banks and Walt Disney will subscribe to bonds with 10- year warrants to purchase more shares in Euro Disney at Fr40 each. The warrants could lead to the creation of an extra 70 million shares.

To keep the park liquid, Walt Disney has agreed to arrange a Fr1.1bn standby line of credit for 10 years at market interest rates. It will also take over some of the park's assets on a lease-financing basis.

Despite attracting the numbers expected when it opened on 12 April 1992, Euro Disney has been badly affected by visitors spending less than expected because of recession. Other harmful factors have been bad weather, the devaluation of the UK, Spanish and Italian currencies, and high interest rates on its loans in the final months of construction and first months of operation.

Philippe Bourguignon, the French chief executive of Euro Disney, thanked staff for their 'great tenacity and outstanding dedication' and said the new plan showed that Walt Disney and the banks 'share our confidence in the potential of Euro Disney'.

Michael Eisner, the chief executive of Walt Disney, said the plan would 'ensure that this resort, which has been the best-received- ever park in Europe, will operate on a sound financial basis as well'.

Euro Disney now believes it will make a profit in 1995, although the refinancing has come too late to stem this year's losses. Last year the park lost Fr5.3bn.