Euro banks, Disney at odds over audit

Responding to complaints from European bankers that they are not getting the cooperation needed to complete an audit on Euro Disney, a Walt Disney Co. spokesman said Tuesday that Disney “has cooperated with the banks as completely as possible” and expressed optimism that the crucial audit would be completed by March 31.

The 60 international banks that put up most of the cash to build the $ 4 billion park — and that have been left staring at $ 3.54 billion in debts — insist they cannot reopen negotiations designed to bail out Euro Disney until the audit is completed.

In a report late Monday, Agence France Presse revealed that KPMG Peat Marwick , which has been retained by the banks to carry out the audit, has not been given complete access to Euro Disney accounts.

A spokesman at Banque Nationale de Paris, which heads the steering committee for the banking syndicate, confirmed to Daily Variety that the bank had written a letter to Walt Disney’s Frank Wells Dec. 27, complaining about the “non-cooperation of Walt Disney” and warning of the “negative effect of such an attitude.”

Walt Disney Co. spokesman Tom Deegan said Disney feels it has “delivered to those auditors all the material relevant to their task of auditing Euro Disney finances. We believe we have cooperated with the auditors for the banks as completely as possible.”

Banking sources said the audit is unlikely to be ready by mid-January, as was initially hoped.

Deegan said Disney continues to be hopeful the theme park renegotiations can be completed before a March 31 target date.

Cooperation pledged

“We are trying to be as cooperative as possible,” said Deegan. “We’re committed to reaching some kind of financial reorganization before March 31, and the process continues.”

Statements by the bankers and Walt Disney Co. demonstrate the intense jockeying among the European lenders and the U.S. movie studio, as each side attempts to gain the upper hand in billion-dollar negotiations to bail out the money-losing venture.

The banking syndicate’s apparent frustration follows statements in the press last week by Disney chairman Michael D. Eisner warning that Euro Disney might close if the banks and the U.S. parent company fail to reach a refinancing settlement.

Eisner pressure seen

Observers noted that Eisner appeared to be trying to put pressure on the banks. Banking sources in Paris said Tuesday that they wanted to avoid playing hardball in the press, “although Walt Disney is free to do what it likes.”

Any delay in the audit will put increasing pressure on both sides to find a solution to Euro Disney’s cash crisis. Walt Disney, which has a 49% stake in Euro Disney, is committed to funding the park’s day-to-day operations until the end of March — the effective deadline for an agreement.

While details of the talks remain sketchy, Walt Disney is reported to have made an offer to inject around $ 200 million in new loans and $ 500 million in fresh equity for the park providing the banking syndicate will come up with similar amounts. Disney chairman Eisner published a statement in the company annual report last week that said Disney shareholders “cannot shoulder the entire burden ourselves, other parties must bear their share.”

Although it has a 49% stake in Euro Disney, Walt Disney is thought to have put up only around $ 180 million of the $ 4 billion spent to build the complex. Entertainment analysts say that in theory, Walt Disney could walk away from the park taking a big blow to its reputation but keeping its wallet intact.

The banking syndicate, however, is arguing that Walt Disney should take responsibility for the $ 3.54 billion debts. “The park was designed by Walt Disney people, the business plan was theirs and the estimates of hotel occupancy , real estate potential and profitability were theirs. It’s difficult to see how they can wash their hands of the park now,” said one syndicate banker.

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