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Euro Disney Tourism Thin This Summer

August 2, 2003

PARIS (AP) _ Mickey Mouse is smiling a lot less in Europe these days.

High debt, lagging tourism revenues, a morose economic picture and French strikes have cast a pall over Mickey’s masters at Euro Disney SCA, the operator of two Disney-themed parks outside Paris.

At this time of year, Disneyland Paris should be teeming with European visitors. But thin tourist traffic and an inability to meet bank agreements are making this a summer of discontent for the company that operates it.

Because of unexpectedly low park attendance and hotel occupancy, Euro Disney said Thursday that it doesn’t expect to meet bank covenants in fiscal 2003 and 2004 _ even though its biggest shareholder, The Walt Disney Co. of Burbank, Calif., had already agreed this year to waive some fees.

If talks toward restructuring its debt fail with banks and Disney, Euro Disney said it wouldn’t be able to make regular payments on its debt totaling $1.7 billion. However, in a statement Thursday, Euro Disney said it believed the discussions will succeed.

Euro Disney also said revenues in the first nine months of the current fiscal year inched up 2 percent from a year earlier to euro748.2 million ($830.2 million). But in the third quarter alone, sales fell 7 percent from a year earlier.

Investors thrashed the stock. Euro Disney shares fell 11.5 percent to close at euro0.54 (59 cents) on Friday. At one point in early trading, they were down as much as 23 percent.

Euro Disney officials, who declined to be identified by name, said Friday it’s unlikely the park operator could be forced to close.

The issue boils down to a technical financial matter, they insisted, saying the day-to-day functioning of the parks won’t be affected. Euro Disney is still in a growth strategy, and doesn’t see any need to cut back on attractions or employment for now.

One analyst agreed the debt picture is unlikely to cause Euro Disney to fold.

``We don’t think it’s life-threatening,″ said Bob Yow, a London-based analyst with Bear Stearns, by telephone from London. ``There’s always the possibility that banks aren’t going to renegotiate their loans, but that’s probably not likely to happen.″

However, he added, ``It’s a bit of a surprise that they’ve made this statement.″

There are just too many important players behind Euro Disney to allow it to fail, Yow said. Walt Disney owns 39 percent of its shares, Prince al-Waleed bin Talal _ a nephew of Saudi King Fahd _ has another 16 perd cent, and its top lender is French state-run bank CDC.

Indeed, the survival and success of Euro Disney is important for France, whose government reaps huge tax inflows from the parks. Tourism is a pillar of the country’s economy.

The French government is so interested in Euro Disney’s fortunes that it has established a post tied to the Finance Ministry to measure and keep watch on the revenue, taxes and jobs the parks generate.

In the late 1980s, France lobbied hard to win the bid to host a Disney theme park in Europe, part of an economic development plan for an area east of Paris once lined with beet fields.

The 11-year-old Disneyland Paris has faced tough times before. After a rocky start, the resort has become one of the main tourist attractions in Europe. With about 12 million visitors per year, it’s the top tourist draw in France, the world’s most visited country.

About 40 percent of visitors to Euro Disney’s parks are from France, some 18 percent visit from Britain, and about 8 to 10 percent are Germans, company officials said. Only about 2 percent are American.

Last year, Euro Disney opened Walt Disney Studios, a giant $540 million park near Disneyland Paris that executives hope will lure up to an additional 5 million tourists a year.

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