The intricate complex of rules, entertainments, shopping malls, hotels, and holiday accommodation which is rising - and indeed has now largely risen - at Marne-la-Vallee outside Paris, is scheduled, when its projected additions, such as business parks, golf courses and "water recreation areas", are complete, to cost some £4.6 billion. That is only marginally less than the original estimate for the Channel Tunnel (though it will be barely half the expected final bill). But compared with that deeply troubled enterprise it has always looked like a miracle of calm, effective management, and that certainly extends to the financing arrangements. Although these are structured to give the Walt Disney corporation 49% of the profits, at the end of the day, in exchange for a mere £80 million of the investment, they have succeeded (so far, at any rate) in leaving all the many other partners and participants quite remarkably happy. The only serious complaint came from the contractors, led by P and O's Bovis International subsidiary, when their claim for a modest £87 million worth of cost-overruns was briskly rejected. But although they winced a bit at the company's terse response ("an estimate is an estimate") the work still went smoothly on. Phase I was finished dead on time, and Bovis duly signed the £1-billion contract for Phase 2 earlier this year.
Underpinning this hiccup-free record, the financial framework is both complex and highly innovative. One important element in it, the £1.25 billion raised from American investors by Merrill Lynch from the sale of "liquid yield option notes", was nominated by Euromoney magazine as one of its 1990 "Deals of the Year". That remains the largest convertible issue ever to hit the US market (the total amount on offer was raised by 50% in response to overwhelming public demand) and it simultaneously provided Disney with a big slab of cheap, risk-free capital (the coupon was only 6% when the market rate was running at over 9%) and gave Wall Street a novel way to pick up a substantial stake in Europe. But it is only part of a much larger picture.
After the French government had agreed to make available the necessary land (which, in a shrewd move of its own, it had bought for £1 an acre and sold on for £70), the first move was to raise £720 million worth of start-up money. Banque Nationale Populaire put together a syndicate including Banque Indosuez (who later went on to organise a further £300 million), S G Warburg in London and France's Credit Agricole. These make up "the investor banks" and retain a substantial interest, as well as an inside track for any future expansion plans. But the bulk of their actual expenditure was paid off, within six months, by the hugely popular flotation of EuroDisneyland on the Paris and London stock markets.
What they were buying shares in, however, was by no means the whole massive operation. The quoted company, EuroDisneyland s c a is responsible only for managing the assets. The burden of construction is the responsibility of something completely different, a wholly-owned Disney subsidiary called EuroDisney scn, and this, in turn, has parcelled out the various specific jobs required among a small platoon of in-house and outside associates.
The most important of these are "the partners" - a high-profile roster of international brand name companies including American Express, Coca-Cola, Esso, Europcar, France Telecom, IBM, Kodak, Mattel, the toymaker, Nestle, Philips and Renault. These, in effect, have built most of the Magic Kingdom's key attractions, in exchange for which they have showered with an assortment of commercial rewards, like Kodak's exclusive right to sell film and cameras on the site.
The mechanism by which these "partners" make their contribution is an agreement to fund the finance company, to the tune of £100 million in equity and £200 million in subordinated loans. During the first 10 years, EuroDisney scn is expected to make losses which the partners can use to reduce their own tax bills. In return they have committed themselves to charging "a favourable rate of interest" which will sharply reduce the project's overall cost of funds. Then, when the accounts start to swing into profit, the participants will be progressively paid off, until, after 20 years the financing arm can be wound up, and the enterprise sold back to the public company for a "nominal sum".
Altogether a very slick piece of financial watchmaking. So now all EuroDisney's chairman, Robert Fitzpatrick, has to worry about is whether a sufficient number of paying customers will continue to surge through his turnstiles. And that is a good deal more comfortable than Alastair Morton's preoccupation: which is whether he will ever manage to get his turnstiles into place.