Anaheim Bond Deal Puts Disney on Hook

The city of Anaheim said it will pay out more than $1.7 billion in principal and interest over 40 years to expand its convention center and improve streets for the Disneyland Resort expansion. Under the terms of the $518-million municipal bond offering unveiled, Walt Disney Co. will not only guarantee a portion of the bonds, but will also be on the hook to pay off the entire debt if its highly touted new companion park to Disneyland is not open by July 1, 2002. The debt, expected to go to market Feb. 4, consists of $518 million in bonds of varying maturities, the longest coming due in 2037. The bonds are to be repaid through a complicated financing arrangement in which Anaheim would pay an amount equivalent to 3% of the city’s 15% hotel bed tax, plus some sales and property taxes generated within the Disneyland Resort expansion area. About $395 million of the bond sale proceeds will be used to fund the expansion of the Anaheim Convention Center, plus the improvements near Disneyland. The balance will be used to make interest payments to bondholders during the construction period, as well as to pay legal fees, underwriting costs, insurance premiums and a host of other administrative costs associated with the offering. Disney has agreed to guarantee 50% of the $242 million in subordinated debt, the riskiest piece of the financing since those bondholders have the last claim on revenues.