Last week, Euro Disney announced losses of Fr5.3bn ( pounds 630m) for its first full year of operations, including an exceptional charge of Fr3.2bn. The shares closed at 370p on Friday night, down 143p on the week.
Despite a radical new cost-cutting plan, the company and its creditors are agreed that the park cannot pay the interest on its Fr21bn debt under present arrangements.
'Some kind of capital restructuring is inevitable,' a banking source said. 'The equity holders should be prepared to take their share of the pain, and not just the creditors.'
The biggest shareholder in Euro Disney is Walt Disney, which has 49 per cent. The banks are unhappy that the US group chose last week to announce its intention to build a new 'American history' theme park on a 3,000-acre site near Washington DC.
Although this park is understood to have been on the drawing board for three years, the timing is unfortunate when Euro Disney and its banks are desperately searching for finance to keep it in business. Walt Disney has indicated that it will not commit further significant sums to Euro Disney beyond the spring.
'That was a real blow below the belt,' another banker said. 'This has to be a team solution with everyone pulling together, and then Disney as good as tells us to get on with it.' In broad terms, that leaves the Americans with a stark choice. Either their stake will be heavily diluted or they will have to give up some of the income they receive from royalties, management fees and concessions.
Ironically, the success of the Tokyo Disneyland means Walt Disney is under considerable pressure from its US investors not to yield more than absolutely necessary.
When the Tokyo park was being built 11 years ago, Walt Disney was so unsure of its success that it accepted a franchise deal rather than become involved in the thickets of Japanese company law.
But Tokyo is now arguably the most profitable of the four Disney parks, thanks in part to the strength of the yen. (Apart from Paris, the other sites are in Los Angeles, California, and Orlando, Florida.)
Consequently, Walt Disney is reaping the lowest proportional return on the most successful of the quartet.
That was one reason why, when the Paris park was being planned, Walt Disney was determined not to miss out.
Jeremy Warner, page 2
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