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Euro Disney mulling financial future

Tourism slump, strikes have helped sink attendance

PARIS — Euro Disney chairman Andre Lacroix must be wishing he had a magic wand.

Failing that, it will be down to the Mouse House and creditor banks to show clemency to the operator of the Disneyland Paris and Walt Disney Studios theme parks — Europe’s most visited tourist attraction — which has warned that it won’t be able to service more than $2.5 billion debts this year and next.

News sent alarm bells ringing on the stock market Friday, where Euro Disney’s share price nose dived as much as 23%, closing 11.48% down at 65 cents.

But the company vowed that discussions with banks and its parent company would “lead to an agreement.”

Euro Disney blames the crisis on lower-than-expected attendance at the theme parks due to the general tourism slump, compounded by a series of transport strikes in Gaul. The parks receive 13 million visitors annually.

In its third fiscal quarter to June 30, revenues were down 7% to $307.8 million, despite a nine-month increase of 2% to $835.6 million.

However analysts believe the financial problems are also structural. A 1994 restructure was supposed to put Euro Disney back on the road to economic health. Ten years later, and following the opening of the $614 million Walt Disney Studios theme park in March 2002, it is still having trouble meeting its financial commitments.

There are fears that punters are put off by the pricey $44 entrance fee for the new park, the same price as the bigger, main theme park next door.

But, however bad things get for Euro Disney, the Walt Disney Company and the Mouse-loving French authorities are there to save it.

Failure in France would be a PR disaster for the Mouse House, which has already waived royalties and management fees in the first three-quarters of this fiscal year to ease Euro Disney’s latest woes. And the French government, which laid out the red carpet for Disney more than a decade ago, is also strongly committed to sustaining this massive driver of the economy in the eastern suburbs of Paris. It’s convenient that Euro Disney’s main creditor bank, the Caisse des Dépôts et Consignations (CDC) is state-owned.