Sunday, April 01, 2012

Of Birthday Parties, Leverage, and Picket Signs

Disneyland Paris notes a milestone with Disney-type festivities:

Disneyland Paris celebrated its entry into adulthood in spectacular style this weekend, with a 20th birthday extravaganza replete with celebrities, parades and a new state-of-the-art show.

The resort 35 kilometers (about 22 miles) east of Paris has a lot to celebrate. After overcoming a rocky childhood, the "Magic Kingdom" now makes up a chunk of the French economy and of Disney's own revenues. ...

It's nice to see that the parks have stabilized, in contrast to the horrid days of 1994 when the place was in financial free-fall. (The '94 drama presents us with another fine lesson in "You get what you have the leverage to get.")

By the start of 1994, with the company [EuroDisney] in serious financial difficulties, and rumors circulating the the park was on the verge of bankruptcy a series of emergency crisis talks were held between the banks and backers.

Everything came to a head during March 1994 when Team Disney offered the banks an ultimatum, that Disney would provide sufficient capital investment for the park to continue to operate until the end of the month, but unless the banks agreed to restructure the $1bn debt that the park's construction and operation had run up, the Walt Disney company would close the park, and walk away from the whole European venture, leaving the banks with a bankrupt theme park and a massive expanse of virtually worthless real estate.

EuroDisney then forced the banks' hands by calling the annual stock-holder meeting for March 15th. Faced with no alternative other than to announce to the stock holders that the park was about to close, the banks started looking for ways to refinance and restructure the massive debts. Then to further increase the pressure on the banks, Michael Eisner, Disney's CEO, went public shortly before the stock-holder meeting and announced that Disney were planning to pull the plug on the venture at the end of March 1994 unless the banks were prepared to restructure the loans.

Finally on March 14th, just before the annual meeting the banks capitulated, and agreed to Disney's demands, effectively writing off virtually all of the next two years worth of interest payments, and a three year postponement of further loan repayments. ...

Back to 2012: No bankruptcies in sight, but there appears to be some discontent percolating at the Magic Kingdom, Paris.

Unions representing workers at the Disneyland Paris complex, operated by Euro Disney SCA (EDL), have called for a 48-hour strike, starting today, in a dispute over salaries and benefits, French newspaper Les Echos said, citing union representatives.

The strike was called by a group of four unions that are seeking a pay increase of at least 4 percent, while the company has proposed a 1.5 percent raise, the newspaper said.

I've no idea if the unions have the kind of leverage Michael Eisner did eighteen years ago, but this is France, so I guess we'll see.


jimla said...

I'm glad the park never closed. It's beautiful. I specially loved the Frontierland-themed Haunted Mansion, the Jules Verne inspired Space Mountain, Fantasyland and Alice's labyrinth.

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