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Euro Disney cash crunch debated

PARIS — As bankers prepare for a Friday meeting on the Euro Disney audit, some bank officials already say it is too early for them to agree on the park’s cash needs or on refinancing proposals.

The Paris meeting will enable banks to present their ideas on debt restructuring measures based on findings of the KPMG Peat Marwick audit.

But determining Euro Disney’s cash needs depends on many assumptions on its future operations.

“The steering committee has ideas for proposals but there are many possible solutions,” said one banker. “For the moment, a debt restructuring package has not been proposed. We have mainly evaluated the situation and presented our ideas.”

He said bankers were not yet ready to give the steering committee of nine banks a mandate to discuss a deal with Euro Disney’s parent, Walt Disney Co.

“We need to examine and approve a proposal before giving them a mandate to sign a deal,” said another banker.

Bankers said Euro Disney needs about 12 billion francs ($ 2.07 billion) to help it deal with its mammoth 21 billion franc ($ 3.61 billion) debt.

But once banks reach an agreement on roughly how much money needs to be found and how it could be raised, bank officials will have to go back to their management to ensure proposed measures were in line with their banks’ strategy.

“We haven’t got the power to decide,” he said, adding that this consultation process could take two weeks.

The first bank official said banks would push Walt Disney hard to make the biggest sacrifice in the financing talks.

“It is after all a 100% Disney project. Their initial financial involvement was not as big as the banks, and they have already got back a large part of what they put in,” he said.

He said Walt Disney had paid only 10 francs per share ($ 1.72) for its 49% Euro Disney stake while investors paid 72 francs ($ 12.39).

It also received royalty payments and management fees.

“They (Disney) are aware that in the past things were not always fair,” the banker added.

Bankers are considering lowering the interest rates at which they lent money to Euro Disney and delaying payments. A capital increase is also being considered but did not necessarily mean bankers had agreed to become shareholders, the banker said.

He said the money could come from Walt Disney, an outside investor and the public.

Reaching a deal with Walt Disney by the March 31 deadline the U.S. firm set now seemed unlikely, bankers said.

“It will be difficult to find a definite agreement before March 31,” the first banker said. “But it is certain that the question must be resolved before Euro Disney’s peak season begins.”

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