Breaking News : The Walt Disney Company Re-Finances Disneyland Paris for an Amount of $1.7 Billion !

Big news today from Disneyland Paris as DLP announced officially the refinancing of Euro Disney debt with a new financing provided by the WDC for an overall amount of 1332 Million  euros ( $1.734 B )! Yes, that's a lot of money, but don't think that all of it will go in new attractions as it's basically an operation to re-finance DLP debt. Basically it means that DLP will use most of the money to pay off the debt they had with the banks...and will owe the same amount or so to the WDC. 

What's the point of doing this, you ask? Well, as it is said in the official press release that you can read below "This refinancing will enable us to reduce our financing costs and give us greater investment and operational flexibility". Also, DLP will benefit from "a more gradual repayment schedule that will provide for 225 million euros of additional cash flow". 

So, is this good news yes or no? Of course it is, the park will save a lot of money on the debt interest that until now they were paying to the banks, and this saved money will very probably be used to the parks development. What we can be sure of is that the WDC knew that there was no way out with DLP financial set-up as it is right now. Instead to invest in the parks development and build new attractions DLP was spending its money to pay off the debt interest, etc... It had became totally insane and in fact there was no other choice than doing what is happening now. DLP still owe a lot of money but for the big part it will be to the WDC instead of many banks and this will change everything. 

You probably remember that recently TIME magazine announced that the WDC was planning a buyout of EuroDisney SCA. Finally it didn't really happened this way - may be the original agreement between EuroDisney SCA and the french government didn't allowed the WDC to increase their shares? - but for sure what has been announced today is another way to get the control on DLP, a kind of undirect control just like anyone would have on someone to whom he did a $1.7 B loan! Or may be it's a first step to a real buyout, the future will tell...

That said, this is good news for DLP which was in a critical financial condition, and hopefully we will know soon if this operation will also bring new attractions in the parks.

Below the official press releases in english and in french versions. Let me know in your comments what you think of all this!

Euro Disney group improves its debt profile with the €1.3 billion refinancing of the group’s debt by The Walt Disney Company

(Marne-la-Vallée, on 18 September® 2012) - Euro Disney S.C.A., parent company of Euro Disney Associés S.C.A., operator of Disneyland Paris, announces the refinancing Euro Disney group’s debt (excluding debt already extended by The Walt Disney Company) with new financing provided by The Walt Disney Company and two of its French subsidiaries, for an overall amount of 1,332 million euros.

The workers’ council has been consulted on the transaction and has rendered a favourable opinion thereon. In addition, the consent of all the creditors, necessary to implement the transaction, has been obtained.

The Supervisory Board of Euro Disney Associés S.C.A. met today and approved the transaction.

With this refinancing, the Group's average interest rate on its debt decreases meaningfully and the Group benefits from greater operational flexibility by removing the restrictive covenants under existing debt agreements, notably those related to restrictions on capital expenditures. Moreover, the extended maturity of the total debt to 2030 together with a more gradual debt repayment schedule will better position the Group to invest in long-term growth and drive value for all shareholders. The transaction is expected to close on 27 September 2012.

« This refinancing will enable us to reduce our financing costs and give us greater investment and operational flexibility. This is a key step in the development of our Resort that we pursue for the benefit for all of our stakeholders. I strongly believe this will be highly beneficial to the Company, its cast members and shareholders.», declared Philippe Gas, Chief Executive Officer of Euro Disney S.A.S.

Philippe Gas added: « The Walt Disney Company, with this transaction, reaffirms its continued confidence in Disneyland® Paris which has successfully become, over the past 20 years, the number one tourist destination in Europe, a growth driver of French tourism and an important ambassador of the Disney brand across Europe ».

 

Principal terms and impacts of the refinancing

• -  As of September 30, 2012, the Group’s debt will amount to 1,710 million euros.
• -  The new financing will be composed of term loans totaling 1,232 million euros and a 100 million euros standby revolving credit facility available until September 30, 2017 and fully drawn on as part of the transaction. These two components of the new financing are unsecured and will carry a 4.0% and a EURIBOR + 2.00% rate per annum, respectively.
• -  The interest expense incurred by the Group will be reduced by a total of 45 million euros over the next 5 years.
• -  The Group will repay 217 million euros of debt principal over the next 5 years, according to a more gradual repayment schedule that will provide for 225 million euros of additional cash flow.
• -  For the fiscal year ended September 30, 2012, the Group will incur an additional financial charge related to the early exercise of the purchase options under the lease agreements, partially offset by a net gain on the debt extinguishment. The Group estimates the fiscal year net impact on financial charges to be an approximate 30 million euros.
• -  This transaction does not have any impact on the royalties due to The Walt Disney Company under the license agreement.
  
  

And now the french version of the press release for D&M french readers:

Le groupe Euro Disney améliore le profil de son endettement grâce au refinancement de sa dette, à hauteur de 1,3 milliard d’euros, par The Walt Disney Company

(Marne-la-Vallée, le 18 septembre 2012) - Euro Disney S.C.A., société mère d’Euro Disney Associés S.C.A., société d’exploitation de Disneyland® Paris annonce le refinancement de la dette du groupe Euro Disney (à l’exception des financements déjà consentis par The Walt Disney Company), par des prêts octroyés par The Walt Disney Company et deux de ses filiales françaises, pour un montant global de 1 332 millions d’euros.

Le comité d’entreprise, consulté sur l’opération, a émis un avis favorable. En outre, l’accord de tous les créanciers, nécessaire à la mise en œuvre de cette opération, a été obtenu.

Le Conseil de surveillance d’Euro Disney Associés S.C.A. s’est réuni aujourd’hui et a approuvé l’opération.

Grâce à ce refinancement, le taux d’intérêt moyen de la dette du Groupe sera réduit de façon sensible et le Groupe bénéficiera d’une plus grande flexibilité opérationnelle. Ce refinancement permettra également de supprimer les contraintes financières imposées par les accords de financement actuels, notamment celles relatives aux limitations des investissements. Enfin, l’extension de la maturité de la dette jusqu’en 2030 ainsi qu’un échéancier de remboursement plus progressif permettront au Groupe d’améliorer sa capacité à investir dans le développement de son activité sur le long terme et à créer plus de valeur pour l’ensemble de ses actionnaires. L’opération devrait être finalisée le 27 septembre 2012.

« Ce refinancement nous permettra de réduire le coût de notre dette et de bénéficier d’une plus grande flexibilité en termes d’investissement et de gestion opérationnelle. Il s’agit là d’une étape essentielle dans le développement de notre destination touristique, développement que nous poursuivons dans l’intérêt de toutes les parties prenantes. Je suis convaincu des effets très positifs de cette opération pour notre entreprise, ses cast members et ses actionnaires», a déclaré Philippe Gas, Président d’Euro Disney S.A.S.

Philippe Gas a ajouté : « The Walt Disney Company, avec cette opération, donne une nouvelle preuve de sa confiance dans l’avenir de Disneyland® Paris, qui est devenu, en vingt ans, la première destination touristique européenne, un moteur du tourisme français et un puissant ambassadeur de la marque Disney en Europe ».

 

Principaux éléments et impacts du refinancement

• -  Au 30 septembre 2012, la dette du Groupe s’élèvera à 1 710 millions d’euros.
• -  Le nouveau financement comprendra deux prêts d’un montant total de 1 232 millions d’euros ainsi qu’une
  ligne de crédit réutilisable de 100 millions d’euros disponible jusqu’au 30 septembre 2017 et utilisée en totalité dans le cadre de l’opération. Ces financements, non assortis de sûretés, porteront intérêts, respectivement, aux taux annuels de 4% et de Euribor + 2%.
• -  La charge d’intérêts encourue par le Groupe sera réduite de 45 millions d’euros sur les cinq prochaines années.
• -  Le Groupe remboursera 217 millions d’euros de principal de la dette au cours des cinq prochaines années selon un nouvel échéancier plus graduel permettant ainsi de disposer de 225 millions d’euros de liquidités supplémentaires.
• -  Au titre de l’exercice clos le 30 septembre 2012, le Groupe devra supporter une charge financière supplémentaire liée à l’exercice anticipé des options d’achats au titre des contrats de crédit-bail, charge financière partiellement compensée par un gain net associé à l’extinction de la dette. Le Groupe estime l’impact net sur les charges financières de l’exercice à approximativement 30 millions d’euros.
• -  Cette opération ne modifie pas les accords relatifs aux redevances de licence dues à The Walt Disney Company.