For French investors, a Euro Disney nightmare

TROUBLING?

Shareholders also point to the fact that Euro Disney made money during the years Disney suspended Related-Party Transactions payments as evidence that the fees are an important cause of the theme park's losses.

Euro Disney faced its first financial crisis just two years after opening. Walt Disney Company suspended royalty fees between 1994 and 1998, before reinstating them at half the normal rate until 2004. The firm's profitable years came during this period. Euro Disney warned in its 1995 financial report that reinstating full payment of royalties and management fees would "have a significant impact on the Group's results of operations."

That prediction came true. Euro Disney plunged back into the red in 2002, soon after an investment in a second park, Walt Disney Studios. The second financial crunch led to a capital-raising operation in 2004.

At that point, "they should have said: 'either we stop these fees, or we buy back everyone's shares at a decent price.' But instead of that they are coming back for more money," said Leroy. "Investors have already lost their underwear. I find it troubling."

A Disney spokeswoman said further deferring or waiving fees would not have substantially improved Euro Disney's liquidity situation.

Moez Bennouri, a finance professor at Rouen Business School, said one problem is that auditors often struggle to determine the market value of Related-Party Transactions. In Euro Disney's case, all but one financial analyst has given up reporting regularly on the stock. The last to do so, financial services firm Oddo Securities, works for Euro Disney to help ensure investors can trade in the company's shares.

A spokeswoman for Oddo said there is a Chinese wall between its brokerage and corporate finance sections.