My Take

Government's recurring theme of bailing out Disneyland

PUBLISHED : Wednesday, 19 February, 2014, 3:44am
UPDATED : Wednesday, 19 February, 2014, 3:44am

Disney and the government have never made public the full financial statements about the theme park since it opened in 2005. Still we know enough to get a pretty good picture of the kind of financial sinkhole Disneyland really is and always has been for the taxpayers of Hong Kong. Not to Disney USA, though, because it's clear the government has been all along the sugar daddy who will absorb most of the losses, fudge the debts and forgo any profit for Disney's bottom line.

Let's start with the latest ruse: a fresh loan request for HK$809 million from the government to build a third hotel that will cost HK$4.26 billion. What kind of resort hotel are they building that's equivalent to more than a third of the government's capital investment - excluding reclamation and infrastructure works - in building the first phase of the park? It looks like it's enough money to fund an expansion. Well, let's forget about the idea behind a 2009 agreement that the expansion of the park will be paid for by Disney, estimated to be about HK$3.49 billion and that "the Government will not inject any new capital into the expansion plan". Officials say the new hotel is not part of that expansion. In any case, a loan is to be repaid, so it's not a capital injection.

Well, this brings us to a short history of the "deleveraging" of debts by Hong Kong Disneyland. In mid-2009, Disneyland owed the government about HK$6.89 billion. After some debt-to-equity conversions including the latest round, that number will be down to about HK$1.1 billion. That's corporate Disney's way of saying: we will never pay you back. But hey, you can call yourself the majority owner and have more seats on the board.

So, that HK$809 million loan, in time, you guess it, will probably be "converted" into equity too. The government keeps saying it has to keep converting debt to equity to keep its majority ownership. But it makes no difference whether it owns 1 or 99 per cent because there is clearly a prior deal that the park will be run by corporate Disney in whatever way it likes with little or no government interference.

Why? Back then, the post-handover government wanted a park so badly and to beat Shanghai it was willing, if it were a father, to let Disney have his daughter and his wife as well.