EuroDisney warns on debt default

By Doreen Walton
BBC World Service business reporter

Not enough people are coming to see Mickey and Minnie

EuroDisney has warned it might have to default on some of its debts after being hit by a sharp downturn in European tourism.

The company said it was seeking fresh help from its banks, and new financing from the Walt Disney Corporation of America.

In a press release from Paris, the operator of the Disneyland theme park in the Marne La Vallee region near Paris pulled no punches.

It said the last three months have seen a sustained and significant slowdown in European travel and tourism and as a result, EuroDisney will be unable to hit targets for numbers of visitors or numbers of hotel rooms booked.

The move has attracted criticism from people involved in pushing the company through a previous financial crisis in 1994.

"When you forget about your priorities, which are your customers and your products, and you run it as a finance organisation, then this is what happens," said Pierre-Yves Gerbeau, a former head of EuroDisney.

Support

The theme park's main backer, the Walt Disney Corporation of America, has already said it will not insist on immediate payment of the royalties and management fees due for this year and next.

But even with such support from its parent, EuroDisney warned it might break the conditions attached to its bank loans.

The banks could respond by withdrawing support, but they are unlikely to do so.

They already have more than $1bn invested in the theme park, money that would be at risk if they were to pull the plug.

Much will depend on the attitude of the Walt Disney Corporation, which owns one third of EuroDisney.

And it's almost inconceivable that Walt Disney would withdraw support from the Paris theme park.

EuroDisney's chairman and chief executive Andre Lacroix clearly thinks new money will be provided.

He said he believed the company had done enough over the 13 years of its existence to persuade its lenders, and the Walt Disney Corporation, to reach what he described as a "mutually acceptable resolution of our future financing needs".