HONG KONG (Reuters) – Hong Kong on Tuesday said the Walt Disney Co will invest $452 million to expand its Hong Kong theme park, seen as necessary to bolster the park’s long-term prospects against a planned rival park in Shanghai.
Hong Kong Chief Executive Donald Tsang said Hong Kong would not invest more capital in the joint venture but would convert a substantial part of its loan to the project into equity.
After Disney’s new investment and the government’s debt to equity swap, Hong Kong will see its stake in the underperforming park fall to 52 percent from 57 percent.
“If there is no expansion, the attraction of the theme park will fall over time, government economist Helen Chan said at a media briefing to announce details of the expansion.
The Hong Kong government desperately needs the expansion to boost flagging attendance, with a much larger rival Disneyland expected to be built in Shanghai in 2014 that could draw much visitor traffic from the burgeoning mainland China market.
“To help deleverage the joint venture the government will convert a substantial part of its loan to equity, retaining a balance of not less than HK$1 billion,” the government said in a statement.
The expansion, which will cost about HK$3.6 billion, will include 30 new attractions and three new theme areas, and will see the total area of Hong Kong Disneyland increase by 23 percent over five years.
The total net economic benefit of the expanded theme park over 40 years would range from HK$64.7 billion to HK$117.3 billion, the government said in a statement.
Hong Kong’s Financial Secretary John Tsang traveled to Los Angeles in May, where he met senior Disney executives. The trip is seen to have paved the way for the breakthrough after Disney earlier said it would stall any expansion amid the credit crunch.
Disney earlier indicated it would likely invest more capital in Hong Kong Disneyland and allow the Hong Kong government to convert its loans to equity to maintain its majority share of the theme park, a source involved in their talks told Reuters earlier.
(Reporting by James Pomfret / Editing by Chris Lewis)