December 31, 2008 / 5:15 AM / in 9 years

UPDATE 1-HK may get shares not cash for Disney loan - paper

(Adds government spokeswoman’s comment)

HONG KONG, Dec 31 (Reuters) - Hong Kong’s government may accept equity rather than cash as repayment for part of a HK$6.1 billion (US$782 million) loan it gave to Hong Kong Disneyland, its loss-making joint venture with Walt Disney Co, a local newspaper said on Wednesday.

The Sing Tao Daily newspaper, quoting unidentified sources, said the proposal was made by Walt Disney and details were being discussed with the government.

A government spokeswoman said the government and Walt Disney were discussing financing expansion plans for Hong Kong Disneyland but no decisions had been made.

“There may be a capital realignment of the joint venture company, that is a possibility,” the spokeswoman told Reuters. “No conclusions have been made yet and we have no timetable for (concluding) the discussions.”

The government has a 57 percent stake in the joint venture after investing HK$3.25 billion while Disney has a 43 percent share, having invested HK$2.45 billion.

As the U.S. company is looking for ways to fund a HK$3 billion expansion of the theme park, an equity conversion would enable the government to retain its majority shareholding in Hongkong International Theme Parks, the joint venture which runs Hong Kong Disneyland, the newspaper report said.

The proposal would allow Disney to lower its overall debt ratio and enhance its ability to borrow more money from banks.

The venture is financed by 40 percent equity and 60 percent debt.

Disney has borrowed HK$8.4 billion for the project, comprising a HK$2.3 billion bank loan it paid off earlier this year and the HK$6.1 billion government loan, which it was supposed to repay within 25 years.

Sing Tao said the government, if it agrees to the equity conversion proposal, would probably need to get it passed in the Legislative Council as it concerns taxpayers’ money.

Hong Kong Disneyland has been losing money since opening in 2005 and the government has been criticised for pumping money into the venture. (US$1=HK$7.8) (Reporting by Xi Chen and Susan Fenton, Editing by Jacqueline Wong)

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