This excerpt taken from the DIS 10-K filed Dec 7, 2005.
Any subordinated long-term borrowings due to the Company and CDC cannot be paid until all senior borrowings have been paid.
The MOA additionally provided for the contribution by Euro Disney of substantially all of its assets and liabilities (including most of the proceeds of the equity rights offerings referred to above) into Disney SCA, which became an 82% owned subsidiary of Euro Disney. Other wholly-owned subsidiaries of the Company retained the remaining 18% ownership interest. This enabled Euro Disney to avoid having to make 292 million of payments to Disney SCA that would have been due if Euro Disney exercised the options under certain leases from Disney SCA. In connection with the restructuring, the Company increased its overall effective ownership interest in Disneyland Resort Paris operations from 41% to 51%. Pursuant to the MOA, the Company must maintain at least a direct 39% ownership investment in Euro Disney through December 31, 2016.
The MOA resulted in the elimination of certain sublease arrangements between the Companys then wholly-owned subsidiary, Disney SCA and Euro Disney. These subleases arose in connection with a financial restructuring of Euro Disney in 1994 whereby Disney SCA (which was then in the form of a SNC) entered into a lease agreement with a financing company with a non-cancelable term of 12 years related to substantially all of the Disneyland Park assets, and then entered into a 12-year sublease agreement with Euro Disney on substantially the same payment terms. These lease transactions were eliminated for financial reporting purposes upon consolidation of Euro Disney by the Company as a result of the implementation of FIN 46R.
As discussed above, the MOA provided for a 2% interest rate increase for certain tranches of Euro Disneys debt, which resulted in a substantial modification of a portion of this debt. Relevant accounting rules required that the substantially modified portion be accounted for as though it had been extinguished and replaced with new borrowings recorded at fair value, which resulted in a $61 million gain recorded in Net interest expense in the Consolidated Statement of Income during the year ended October 1, 2005.
Certain indirect, wholly owned subsidiaries of The Walt Disney Company have liability as current or former general partners of the operating subsidiary of Euro Disney to which substantially all of Euro Disneys assets and liabilities were transferred in the restructuring. In addition to their interest in this operating subsidiary of Euro Disney, certain of these subsidiaries of the Company have been capitalized with interest-bearing demand notes with an aggregate face value of 200 million.
See Note 6 for the terms of Euro Disneys borrowings.
Euro Disney had revenues and net loss of $575 million and $122 million, respectively, for the six months ended March 31, 2004 while the Company still accounted for its investment on the equity method. Euro Disney had revenues and net loss of $1,077 million and $56 million, respectively, for the year ended September 30, 2003.