Global entertainment and media titan Walt Disney (DIS) is putting together a plan worth 1 billion euros, or just more than $1.25 billion, to help bail out Euro Disney S.C.A., which owns and operates Disneyland Paris.
Disney currently owns 40% of Euro Disney, but the House of Mouse is also a Euro Disney creditor. The terms of the recapitalization plan, which comes as Europe itself is teetering on the brinks of recession, are as follows:
- Euro Disney will receive a €420 million (or $525 million) cash infusion from its parent company
- €600 million (or $750 million) of debt owed to Disney will be converted into equity
- Disney will defer certain amortization payments from Euro Disney until 2024
- Disney will consolidate various lines of credit that are set to expire in 2014, 2017 and 2018 into a “single 350 million euro revolving credit facility maturing in 2023.”
These are generous terms to be sure, but after all, DIS has a sizable amount of skin in the game and wants to give Euro Disney every chance to succeed. Besides, as of June 30, Walt Disney had $4.1 billion in cash and short-term investments, so parting with $525 million won’t break the bank.
The move to shore up Euro Disney’s balance sheets comes days after Disney’s board of directors decided to extend Chairman and CEO Bob Iger’s contract by two years through June 30, 2018.
In another move that came directly after Iger’s contract extension, Bloomberg reports that Walt Disney, along with Time Warner (TWX), both renewed their contracts with the National Basketball Association, agreeing to carry NBA games through 2025. While exact terms of the deal aren’t known, sources say that DIS (which owns ESPN and ABC) and Time Warner (owner of TNT) will pay about twice as much as the combined $930 million annually that they currently shell out for rights to NBA games. The new contract rates will go into effect at the beginning of the 2016-17 season.
DIS has truly transformed under CEO Bob Iger, who, with the Euro Disney recapitalization and NBA broadcast deal, continues to make savvy moves to keep his company at the top of the media and entertainment world.
The press release announcing his extension extols a number of his accomplishments:
“Mr. Iger’s vision and strategy for the company led to the successful acquisitions of Pixar, Marvel and Lucasfilm, the resurgence of Disney animation, and the dramatic expansion of its parks and resorts around the world, positioning the company for continued long-term growth.”
During Mr. Iger’s tenure, Disney also formed a close business relationship with Netflix (NFLX), which, in 2016, will exclusively distribute Disney’s theatrically released feature films after they hit the theaters.
As for DIS stock, it has gone absolutely gangbusters under Iger, with shares returning more than 300%, vs. just over 90% for the S&P 500.
When all is said and done, the decision to help Euro Disney recapitalize during tough times should prove to be yet another calculated move by Iger that pays off in the long run.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid.
