The Walt Disney Co. to refinance debt with 1,3 billion EUR

[Josh]

€100 million doesn't go very far.  It would only just cover the cots of Ratatouille.

But that's already been covered by the credit facility from TWDC.

So how much profit are EDSCA expected to receive each quarter, now?

[mickeyspal]

From looking into it a bit more (on the ft website), EDSCA will now be paying 4% on this debt rather than 5.1%. Obviously 1.1% of 1.3 billion is a lot (143 million of savings just for starters) that this deal will save them. Although I think that removing the covenants is better news as a lot of work needs to be done.

As far as I can tell, you're right about that- since the walt disney company is taking over the terms of debt repayment, they've set a lower rate for each year- effectively meaning that the park is 143m (I got 187m?) euros better off-- which, considering that its net profit last year was -64m, an extra 143 (or 187 million)  to play with each year is a bloody good deal! (if they had this last year, they'd have made a profit of 79m (or 123m) euros!


-- bare in mind, im not a financial expert and don't really know what im talking about  :-"

It's 143m extra, but like any company showing profit on their books, they still have to turn it into hard cash to benefit.

[ford prefect]

€100 million doesn't go very far.  It would only just cover the cots of Ratatouille.

But that's already been covered by the credit facility from TWDC.

Yes, Josh.  You are correct.  I am aware of that.  

However my point was to illustrate that €100million does not go very far and that people should not assume that there will suddenly be lots of pennies to spend because TDWC have metaphorically fished around the back of the sofa and found some loose change.

The primary reasons (in my opinion) why TWDC would take this action are to ensure that EuroDisney SCA will have sufficient funds to pay the licences and to facilitate the easy purchase of Disneyland Paris.

I would not expect a sudden influx of cash as other people have stated.

[dagobert]

However my point was to illustrate that €100million does not go very far and that people should not assume that there will suddenly be lots of pennies to spend because TDWC have metaphorically fished around the back of the sofa and found some loose change.

The primary reasons (in my opinion) why TWDC would take this action are to ensure that EuroDisney SCA will have sufficient funds to pay the licences and to facilitate the easy purchase of Disneyland Paris.

I would not expect a sudden influx of cash as other people have stated.

That's how I see it as well. I guess nothing big will happen in the near future.  The new arrangement just helps ED SCA to be more flexible when it come to operating the park, but it doesn't provied enough money to invest heavily. As I see it, a major expansion of WDSP has still to be funded with new debts.

If ED SCA wants to invest in the parks, the money should be used for improving maintenance and to hire more CMs. It would also be great if the money would be used to open ALL attractions EVERY DAY from OPENING until CLOSING.

[disney-john]

However my point was to illustrate that €100million does not go very far and that people should not assume that there will suddenly be lots of pennies to spend because TDWC have metaphorically fished around the back of the sofa and found some loose change.

The primary reasons (in my opinion) why TWDC would take this action are to ensure that EuroDisney SCA will have sufficient funds to pay the licences and to facilitate the easy purchase of Disneyland Paris.

I would not expect a sudden influx of cash as other people have stated.[/quote]

I believe it has to do with a buyout....

[disney-john]

Haven't quoted right sorry

[ford prefect]

Haven't quoted right sorry

[Josh]

Yes, Josh.  You are correct.  I am aware of that.  

However my point was to illustrate that €100million does not go very far and that people should not assume that there will suddenly be lots of pennies to spend because TDWC have metaphorically fished around the back of the sofa and found some loose change.

Oh, sorry. xD

So this could actually make a buyout easier? There's been a lot conflicting reports over whether that is so. So how much time would they need before a buyout is possible?

[ford prefect]

Theoretically a buyout could happen at anytime.  Personally, I don't think a buyout will happen anytime soon.  

There are several implications.
1) EuroDIsney SCA has a very complicated structure.  The Phase 1 and 2 construction companies are essentially worthless paper entities that hold the debt. This debt is owned by assorted Hedge Funds.  They will be after more than their pound of flesh for the debt if a rich suitor such as TWDC comes a knockin'
2) Prince Alwaleed will also be after substantial recompense for having rescued the venue.  However, he may stay on a minority stakeholder
3) The small shareholders (like me!) are the losers.  We would receive a fraction or even nothing if a surreptitious takeover happens.  TWDC would not like the bad publicity.
4) TWDC cannot afford to pay the commercial rate for the shares AND shoulder the debt burden. They would wait until EuroDisney SCA fails naturally.  

The more I think about this, the more I am seeing this as a money saving exercise only.  EDSCA saves millions.  TWDC looks great as a knight in shining armour and saves money if it has to buy out the resort AND starts to earn money from the character licenses. The interest rate is better as TWDC can use their borrowing power to refinance up against a failing currency.  For if (when) the Euro fails the debt will be significantly less.

A good move by TWDC, but one which will be a 5 year plus plan before the real reasons are known!

[ed-uk]

This is very good news, now Euro Disney can  repay its debts to the WDC instead of the banks at a more favourable rate of interest, and the company will no longer have to go to the banks to seek approval when they want to build a new ride. It's a shame they couldn't have done it years ago. I still don't buy the buyout theory by the WDC, which I don't think will happen, there is nothing in this annoucement that points to that.  And just to add there is no way WDC could just simply take over the shares of Euro Disney.

[amanda08]

If ED SCA wants to invest in the parks, the money should be used for improving maintenance and to hire more CMs. It would also be great if the money would be used to open ALL attractions EVERY DAY from OPENING until CLOSING.

could not agree more dagobert!

[Maarten]

During the Goldman Sachs 21st Annual Communacopia Conference, Jay Rasulo participated in a question-and-answer session about The Walt Disney Company's financial policy. He was shortly asked about Disneyland Paris' refinancing.

Drew Borst – Analyst, Goldman Sachs
And maybe one question about Disneyland Paris. Earlier this week there was an announcement of a refinancing. Can you explain what is going on there with them in terms of what their…?

Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company
Sure. Since the early days Disneyland Paris was pretty heavily debt laden as a company. And despite its increasing commercial success, the financial burden on that company was pretty heavy. And there were a number of refinancings. The interest rate was the best one to get in the market at the times of those refinancings, but it still left a pretty complex web of lenders and, more importantly, increasingly complex covenants under which the company had to operate.

And those covenants and the resolving around them spending the capital that you need to spend in the business was a constant drain on management time over there to constantly go back, negotiate waivers to the covenants, explain the operating business to the bankers.

And we finally decided that with the availability of capital to the parent company at great rates that we would refinance, we'd buy in all that existing debt and extend a similar loan to Disneyland Paris at a rate that for them ended up being 100 basis points less than the average rate that they were borrowing at.

And of course being the parent company, and being incredibly supportive, kind of took this issue of covenants out of the picture. So I think it was a strategic decision to allow that business to operate in a less fettered way, or almost an unfettered way relative to what the debt was causing them and the covenants around the debt was causing them to do.

Lowered their cost of borrowing, has not increased our balance sheet borrowing at all because of course we were already consolidating all the debt of Disneyland Paris onto our books. You have read recently what the rating agencies have said about this transaction; it hasn't burdened us with any debt, hasn't changed our rating in the market, hasn't altered our ability to borrow money as The Walt Disney Company.

So I think all around it was a very successful transaction and ended up getting the approval of course of the government because the government was one of the big lenders to Disneyland Paris. The supervisory Board and the Workers Council all agreed that this was a great transaction. So we are really looking forward to providing those guys with clear airspace to do what they have to do to grow that business.

Drew Borst – Analyst, Goldman Sachs
And it seems like you are pretty content with the current structure, I mean, this is a structure that has been in place for some time now. I believe you -- Disney manages it. Do you have control over -- you are the biggest shareholder. Because there has been some speculation in the recent past about that you might want to buy it in. Is there any strategic merit to that given…?

Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company
You know, we -- of course when you look at a major refinancing you have to ask yourself that question, and we did. And we really didn't see any strategic improvement in the business by buying in all of the outstanding shares. Our shareholders have been supportive of the growth of the company and we really felt that the debt was the burden we had to handle.

http://http://thewaltdisneycompany.com/investors/events

So apparently The Walt Disney Company has no intention of buying in EuroDisney in the foreseeable future.

[Javey74]

I emailed the Shareholders Club and asked what this really meant for the shareholders and the possibility of any buy out..  

This was their reply:-

Dear Sir,
 
Thank you for your e-mail and your interest for Euro Disney.
 
Please find below further information on this recent transaction.
 
This transaction will indeed provide a number of benefits to the shareholders and the Company, as this refinancing provides Euro Disney with a lower interest rate and a more simplified financing structure. The Group will also benefit from improved flexibility in operating the resort and in investing for its development.
 
Furthermore, this refinancing does not have any impact on the ownership structure of Euro Disney and does not involve changes in governance.
 
Feel free to contact us for any further information.

Yours sincerely,

Euro Disney S.C.A.
Shareholders Club

Then this arrived..  :shock:

Dear Shareholders Club Member,
 
To better meet the needs of the Shareholders Club Members and offer them a quality service and relevant information on the Company, the Shareholders Club is pleased to announce the implementation of the new « General Conditions of Euro Disney S.C.A. Shareholders Club » effective Monday, October 1st, 2012. We invite you to consult the attached document for additional information.
 
As of this date, any shareholder would like to become a member or to renew its membership to the Shareholders Club, has to hold a minimum of 100 Euro Disney S.C.A. shares (ISIN code: FR0010540740) in a bearer or a registered form. Members of the Shareholders Club who joined before October 1st, 2000 and who hold a valid membership card, are exempt from this minimum shareholding.
 
We invite you to consult the new « General Conditions of Euro Disney S.C.A. Shareholders Club » in the attached document.
 
Please note:
 
Regardless of the number of shares you hold, you will continue to benefit from the Shareholders Club discount and offers, upon presentation of a valid membership card.
 
You can then request a renewal of your membership, as outlined in the General Conditions of the Shareholders Club.
 
 Please contact us for any further information.
 
Yours sincerely,
 
Euro Disney S.C.A.
Shareholders Club

New membership criteria…

The Shareholders Club is only for individual Euro Disney S.C.A. shareholders who own a minimum of 100 Euro Disney S.C.A. shares (ISIN code: FR0010540740) in a bearer or in a registered form. The membership is free and valid for 2 years. Members of the Shareholders Club who joined the Shareholders Club before October 1st, 2000 and who hold a valid membership card are exempt from the membership criteria of holding a minimum of 100 Euro Disney S.C.A. shares. If they hold a minimum of 5 Euro Disney S.C.A. shares, they can renew their membership as outlined in the terms and conditions.

[ed-uk]

Thanks for posting, Maarten and Javey74.

[Josh]

And there we have it. I guess buying the debt is all they're going to do. And it makes sense. They shouldn't need to do any more to improve the resort. Thanks for posting the info.