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  1. #1

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    Thumbs down Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    http://www.reuters.com/article/marke...rpc=44&sp=true

    Quote Originally Posted by Reuters

    By Gina Keating

    LOS ANGELES, July 30 (Reuters) - The Walt Disney Co (DIS.N: Quote, Profile, Research, Stock Buzz) has offered to refinance more than $300 million in commercial loans due on Sept. 30 for its Hong Kong Disneyland joint venture, but has met with resistance from its partner, the Hong Kong government, a Disney spokesman said on Wednesday.

    In a financial filing on Wednesday, Disney disclosed that it has been in talks with the Hong Kong Special Administrative Region over financing arrangements to allow its newest park to pay off the commercial loans of about $329 million.

    In talks with the Hong Kong government, Disney "has expressed its willingness to replace the facilities with loans from the company" and "to provide additional investment" in the park, which has been criticized as too small to draw long-term stays and repeat business.

    But Disney has not reached an agreement with the joint venture to resolve the loan, raising the possibility that the joint venture would turn instead to a tight commercial credit market for potentially onerous terms and saddling the company with potentially unfavorable financial disclosures.

    The company was "disappointed that both shareholders in the joint venture hadn't yet been able to reach an agreement," Disney spokesman Jonathan Friedland said.

    Disney believed its loan offer would give the joint venture "financial breathing room" needed to maintain the Hong Kong park's recent operational gains and set it on a firm financial footing, Friedland said.

    "We are totally confident and committed to the continued growth of Hong Kong Disneyland as a premiere tourist destination in the region, demonstrated by the company's offer to assume the loan," he said.

    Last year, the joint venture was forced to amend its loan agreements after the Hong Kong park failed to meet semi-annual performance targets.

    The amended agreement removed the performance targets and decreased the amount of a revolving credit facility but also shortened the loan due date to Sept. 30, 2008, from Oct. 15, 2015.

    As part of that amendment, Disney waived management fees and deferred royalties for fiscal 2008 and 2009 to support the park, whose attendance has lagged expectations since its 2005 opening.

    The 310-acre (126-hectare) park is expandable to a total of 457 acres (185 hectares) to accommodate future phases, according to Disney.

    The Hong Kong government, which owns 57 percent of the park, has taken political heat for the park's missed attendance target and has branded its performance as "unsatisfactory."

    The park became the sole beneficiary this week of an easy-visa arrangement that could bring millions of visitors from mainland China who are not normally qualified to visit Hong Kong.

    Ok so HK government not willing to invest more money, and refused the load from WDC.
    I am sure WDC would offer better rate to HKDL than the banks would.
    Think of all the money they can save. Why don't HKG accept it?
    I am very disappointed at HKG.
    Last edited by wishyouwell; 07-31-2008 at 05:59 PM.

  2. #2

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    ORWEN: Well, if I'd been in charge of that Hong Kong Government, you can bet I'd have been willing to take on that load from the Disney Company. And while I was at it I'd ask them for a loan, too!

    ORGOCH: Guess it's doomed ta be a small park after all!!

  3. #3

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    Article from the SCMP Aug 1st:

    Disney, HK split over refinancing park's debt
    The government and Disney are at odds over the US media giant's desire to assume commercial loans of about HK$2.6 billion held by the Hong Kong theme park. In a filing with the US Securities and Exchange Commission detailing its third-quarter performance, Disney says it is in talks with the government about how to meet the debt obligations when the commercial loans become due on September 30.


    Disney said it had offered to take on the loans and was willing to provide additional investment to meet Hong Kong Disneyland's longer-term financial needs.
    Disney spokesman Jonathan Friedland was quoted by Reuters as saying the company was "disappointed that both shareholders in the joint venture hadn't yet been able to reach an agreement". Mr Friedland said the offer would give the theme park "financial breathing room" to shore up its balance sheet and maintain recent operational gains.


    "We are totally confident and committed to the continued growth of Hong Kong Disneyland as a premier tourist destination in the region, demonstrated by the company's offer to assume the loan."


    The government had put forward proposals for the park's financing and future expansion, a spokesman said. "For the sustainable development of Hong Kong Disneyland and for the government's interests as a majority shareholder of the park, we have made counter-proposals and are awaiting Disney's response."


    The government holds a 57 per cent stake in the joint venture with Disney and there are fears a lack of an agreement on the way forward may force the theme park to refinance in an increasingly tight credit market and accept less favourable terms.


    According to the SEC filing, the debt as of June 28 consisted of a commercial term loan of about HK$2.3 billion, including interest, and a revolving credit facility of roughly HK$300 million. Under the original agreement, a HK$2.32 billion loan and HK$1 billion revolving credit facility were due on October 26, 2015, and contained semi-annual financial performance covenants to be met.


    Last November, in anticipation that conditions attached to the debt would not be met, the agreement was amended to remove the conditions and shorten the maturity of the loans to September 30 this year. The revolving credit facility was reduced to HK$800 million.


    Disney also agreed to temporarily forgo the management fees and royalty payments it receives from the theme park. These fees amount to US$7 million a quarter.
    Improving the park's balance sheet is crucial as it must fund new attractions, which can help boost attendance, with its own operating income. However, lower-than-expected attendance hurts revenue, which limits funding for new attractions and in turn leads to fewer visitors for the park.

  4. #4

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    I wonder what counter-proposals HKG made..... have WDC "donate" money to HKDL for the whole cost of expansion maybe?

  5. #5

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    HK Govt's argument is that if WDC, the minor shareholder, is also the loan provider, it will actually have more control over HKDL's finances than HK Govt, the majority shareholder.

    The problem is, if HKDL began making money and WDC increased the interest rates of the loan, then it would be very unfair to HK Govt. I know this is still very far in the future but it is a possible scenario.

  6. #6

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    They should negotiate the terms before making an aggreement. I think the contract can avoid both parties from what you are worrying about.

  7. #7

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    HKG is the most stupid and lazy government in the world!

  8. #8

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    Re: Disney offers to refinance Hong Kong Disneyland loan, HK Government resisted

    I wonder how much of this denial is due in part by the goverment's involvement to spend for Ocean Park's improvements and infrastructure...

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