Looks like I will get to take that Disneyland Paris vacation after all. No one seriously expected the Walt Disney Company (or France for that matter) to let the park close. With around 15,000 employees and 15 million yearly visitors, it’s a huge boost to the French economy. In addition to a black-eye for Disney, a closure would spell bad things for an economy, which is, admittedly, at the beginning of a delicate recovery. That just wasn’t going to happen.
The park debt, much of it the result of building too many hotels when the park opened, has been an albatross around the resorts neck since its beginning. Multiple refinancings and capital investment have floated the park through restructurings that the company hoped would finally put it in the black.
Early this morning, Euro Disney SAS, the parent company of Disneyland Paris, sent out a letter to its shareholders announcing yet another debt restructuring and capital investment. They also released this oddly optimistic explanation from Mark Stead, SVP and CFO of Euro Disney:
Yes, that’s a $1.25 billion recapitalization of the company (think of it as a mini-bankruptcy, we’re increasing the number of shares, which makes your shares worth less, but less is better than none, which would result in a full bankruptcy).
The details were outlined in a letter sent to Shareholders from the recently appointed President of Euro Disney SAS Tom Wolber:
“First, there would be an injection of approximately 420 million euros via capital increases in Euro Disney S.C.A and its principal subsidiary. Second, there would be a significant reduction of the Group’s indebtedness through the conversion of 600 million euros of the debt owed to TWDC into equity of Euro Disney S.C.A. and its principal subsidiary. Lastly, there would be an improvement of the Group’s liquidity via the deferral of amortization of loans until final repayment in 2024.”
The conversion of 600 million euros of debt into equity and deferred amortization will reduce Euro Disney’s indebtedness to The Walt Disney Company significantly. The over all effect will reduce the leverage ration from approximately 15x to 6x. I hope that’s enough.
What you did not see in that announcement was new rides, refurbishments, or other investments. But the end result of this recapitalization is to put the company on a footing where it can afford to make those much needed capital investments without driving the company further into dept. There is a revolving fund of $350 million available to make those investments. $350 may not go very far by itself, but reduced dept payments should also mean that more of the take from the gate and store sales can also go back into operations and maintenance.
All this depends on approval from Shareholders at next year’s shareholder meeting, but it sounds like The Walt Disney Company will step in with some help between now and then (reading between the lines).
Is this enough to put Disneyland Paris on the path to true profitability? Time will see. Read this great explanation of how we got here from Disney and More. We at least have a few more years of capital investment ahead of us and it looks like The Walt Disney Company will play a larger role in the park’s management.
Do you think this will be enough? Should Disney have done more?
Given the significant hurdles TWDC would have likely faced from the French Government and labour unions in seeking to fully absorb EuroDisney (Which, I maintain, would be in the long term best interests of not only The Walt Disney Company but also the resort itself, the cast members and even the French economy), this is probably the best solution available.
The conversion of debt to equity gives TWDC a much more significant financial incentive to invest in DLRP, changing form a sense of “throwing good money after bad” to a more direct “spend money to make money” mindset. The scale of the debt reduction overall is especially encouraging. halving the overall debt will make a huge difference to the liquidity of EuroDisney.
TWDC having more direct control over park operations and planning is absolutely the silver bullet to making DLRP live up to its potential as a world class resort destination. If show standards and attraction quality can be brought up to an equal footing with Tokyo, DLRP can really shine on its own.
Parc Disneyland has the potential to be one of the best Disney parks. It just needs some attention in the form of better maintenance, updates for older rides (Star Tours, a revised Space Mountain returning to a new take on the de la Terre a la Lune concept) and just a couple of new, big name rides. Both unique, and expies of rides Europeans have been drawn across the pond to see. They don’t even have to be especially big and flashy, as long as they have name recognition and the Disney magic – hence my previous suggestion of a Jungle Cruise expy (Perhaps a Dark Ride variant to account for the Parisian climate).
There is definitely far more to be done at Walt Disney Studios, but it could be fixed for vastly less than the cost of fixing California Adventure by freshening up the older, untouched areas and installing even more thrill rides, which would massively increase the appeal of the park to the thrill-seeking European audience. Even some heavily themed variants of conventional spinning, gravity and pendulum rides would go a long way towards this without breaking the bank. These might not be rides you’d expect to see in WDW, but they’d be smart additions in DLRP and Studios has the space for them – especially if you jettison lacklustre, outdated attractions like Armageddon to make room – and is a fitting home. It is already, after all, home to the Twilight Zone Tower of Terror.
Don’t know about turning a profit, I’m sure I don’t need to tell anyone the state of Disneyland Paris is in, however the hotels for a 2 night stay is equal to a weeks stay at WDW. The pricing is just ridiculous, the hotels that are not official Disney Hotels but are near site, with free shuttles are defiantly the cheaper option.
Magic Kingdom is spot on, however a few rides could do with a refurbishment and ride upgrades and maybe some theming can do with a clean up. Also I see the Mark Twain (on another site) has been majorly neglected. (http://bit.ly/1EkfnHA)
Hollywood Studios is probably in need of the most love and attention, Armageddon can go for me, the entrance studio with the shops and restaurants could do with a overhaul and again rides could do with refurbs and upgrades.
When I last went Space Mountain, RC coaster and The Solider Parachute Jump were constantly having to be reset, which was at least 30/40 minute wait or all day for Space Mountain.
Another issue is outside the train station which sits between Magic Kingdom and the Downtown area. At night as you leave the park you can see many street sellers, I get people need to eat and obviously this area isn’t owned by DLP or they would have done something about it.
I feel quite bad for putting this on, as I said before “I understand people have to eat” but feel this just makes it more of a flea market than a holiday resort, you don’t get this at any other park, I doubt you get it at Disney Sea or Disneyland California (I haven’t been to either, but I’d be surprised if they have) apologies if this upsets anyone, it was not my intention, just wanted to highlight an issue that I feel Disney could resolve or help.
The above comment about prices is spot on, the only way disney Paris will survive is to reduce park costs which in turn increases visitors, spend money on new rides, update and remove some tired tides and perhaps look at an epcot style addition in unused area beside the two other parks, to me having been to Paris any more then two or three days and you have seen and done everything so why stay longer, another park area and guests would look to add extra nights to there stay.
Huh? I don’t understand the comments about the hotel prices being high. I have priced out an entire week with admission and dining plan for around $850 for two people.
Hey Chris,
I’m curious where you booked, what period and which hotel?
A reservation through the official website of Disneyland Paris tells me that a weeks stay in the cheapest Disneyland Paris hotel with a standard dining plan for two 10 – 16 november (low season) is $ 3.282,- dollar!
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