Disney moves to cut park financing costs

PUBLISHED : Friday, 23 November, 2007, 12:00am
UPDATED : Friday, 23 November, 2007, 12:00am

The Walt Disney Company has cut its revolving credit facility for its Hong Kong theme park by about 20 per cent.

The move, which would cut costs, follows an announcement this month of new financing arrangements with major creditors of Hong Kong Disneyland. The theme park will repay over HK$2 billion of bank loans in the next 12 months. Disney will also temporarily forgo management fees and royalty payments, as requested by the government.

In the company's annual filing with US regulators, released on Wednesday, Disney said loan terms for the theme park had been amended.

Apart from the announced measures, the available credit in the revolving facility has been cut from about HK$1 billion to about HK$800 million.

The reduction in available credit will cut interest and handling fees generated by the original amount of credit.

The document said the loan term maturity, originally set for 2015, had been shortened to next September. It added that royalty payments would depend on operating performances of Hong Kong Disneyland.

The park's first-year attendance of 5.2 million fell short of its 5.6 million target, while the second-year attendance is believed to be about 4 million. New financial measures were proposed to improve the park's balance sheet.

A spokesman for Hong Kong Disneyland said the Walt Disney Company was in talks with the government on financial and development needs of the theme park.

He said the company aimed to expand the theme park and ensure its long-term success as an iconic tourist destination of Hong Kong. The company could not comment on the issue before both shareholders finalised the deal.

He added that the decision to waive management fees and defer royalties was testimony to the company's commitment.