Overview of the recapitalization proposal

Here is the official overview of the proposal being presented by Euro Disney S.C.A and TWDC to it’s shareholders.

Overview of the Proposal

Euro Disney S.C.A. announces a proposal for a €1 billion recapitalization
Overall rationale
The proposal is designed to improve the financial position of Euro Disney and enable it to continue investing in the guest experience.

Context of the operation
Challenging economic conditions in Europe coupled with Euro Disney’s debt burden have negatively impacted its financial performance.  Due to these factors, Euro Disney has been constrained in its ability to make investments in Disneyland Paris

Details of the proposal

  • Cash infusion of approximately 420 million euros, made or guaranteed by Disney through capital increases of Euro Disney S.C.A. and of its principal operating subsidiary;
  • Conversion of 600 million euros of part of the debt owed to Disney into equity of Euro Disney S.C.A. and of its principal operating subsidiary;
  • Deferral of all amortization payments of loans granted by Disney until revised maturity in 2024 (currently 2028); and
  • Consolidation of the existing lines of credit granted by Disney maturing in 2014 (which has been already extended by Disney to 2015), 2017 and 2018 into a single 350 million euros revolving credit facility maturing in 2023

Objectives of the proposal

  • Improve the cash position of the Euro Disney Group by approximately 250 million euros;
  • Reduce the Euro Disney Group’s indebtedness, currently exclusively owed to Disney, from 1,748 million euros to 998 million euros, reducing its net leverage ratio from approximately 15x to 6x;
  • Improve the Euro Disney Group’s liquidity through interest savings and deferral of amortization of loans until final repayment in 2024.

Parties involved
Euro Disney S.C.A. shareholders would have an opportunity to participate in the capital increases of Euro Disney S.C.A. alongside with Disney, at the same price.
As a result of the contemplated capital increases of Euro Disney S.C.A. and in accordance with applicable regulations, Disney would be required to launch a tender offer on Euro Disney S.C.A. shares.

Euro Disney S.C.A.’s Supervisory Board has expressed unanimous support for this proposal.

Indicative Timing of the operation and milestones
After the information and consultation of the Workers’ Council and the Shareholders’ approval during the general meeting of ED S.C.A.’s shareholders early 2015, the transactions contemplated by the proposal are expected to be completed in the first semester of calendar 2015.

FAQ

What are the details of the proposal?
The proposal is a 1 billion euro recapitalization of the Euro Disney group backed by The Walt Disney Company (“Disney”) and designed to put the company on better financial footing; it will improve cash balances and reduce debt. This proposal, if implemented would:
  • Improves cash balances by €250 million
  • Reduces debt by €750 million

Why are you doing this?
Despite continued investment in the resort, Euro Disney has been negatively impacted primarily by the challenging economic conditions in Europe. Euro Disney needs to improve its cash balances and reduce its debt to continue to invest in the guest experience. This proposal achieves these goals.

Do I have something to do now with respect to this proposal?
No. No immediate actions are required from you for now as the transaction is expected to take place first half of calendar year 2015. It’s important to understand all your options and take the time to review them.

What are the benefits of the transaction for shareholders?
The proposal will improve the financial position of Euro Disney and enable it to continue investing in the destination. This improved financial footing can only benefit the Euro Disney shareholders.

My shares were worth 3.46 euros before the announcement, will my holding lose value?
The proposal allows shareholders to preserve economic value of their holding
The example below demonstrates how to preserve your economic value but is one of many options you have as a shareholder. You have time to review all your investment options as the transaction will occur in the first half of 2015.
If you want to guarantee the full value of shares at their pre-announcement share price, you would participate fully in the rights offering and then sell all your shares into the mandatory tender offer.

  • Pre-announcement: 1 share at €3.46
  • Post transaction: 1 existing share: to be sold at €1.25 (i.e. TERP) to TWDC in mandatory tender offer + 9 new shares: subscribed at €1.00 per share through full participation in the rights offering. Then sell all nine new shares at €1.25 to TWDC in the mandatory tender and realize €2.25 net value
    = €1.25 + €2.25 = €3.50 i.e. slightly above pre announcement value

You have the flexibility to pursue a range of options—among them, to fully realize the value of your shares at their pre-announcement share price; to maintain your ownership percentage; or to make no new investment, realize any value from selling your subscription rights, and hold or sell your shares.

What are the next steps for implementation of the proposal?
Next steps for the proposal include, first the workers’ council’s information and consultation period initiated today, then approval of the shareholders (at a general meeting expected in early 2015) and the delivery of a comfort letter by an independent expert regarding the preliminary opinion on the fairness of the mandatory tender offer price in November. The transaction is expected to take place first half of calendar year 2015.

How will this transaction impact admission criteria to the shareholders Club?
There will be no changes to the admission criteria for existing members of the Club due to this transaction. However we may adjust admission criteria in the future for new shareholders.

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