Walt Disney has said it will fund a $452 million expansion of Hong Kong Disneyland in a bid to boost the park’s flagging attendance.

The deal comes after more than two years of negotiations between Disney and the Hong Kong government, which is a majority owner of the park.Disney was prepared to fully finance the expansion, however the government wanted to retain its controlling stake despite not investing any further money.

The US entertainment giant will now front HK$3.5bn and convert HK$2.7bn of existing loans to the park into equity, boosting its stake to 48% from 43%.

The government will convert existing loans to the park into equity, but won’t invest any new capital. Its stake will fall to 52% from 57%.

The expansion will see the park’s physical size increase 23%. It will feature three new themed “lands” which will be added in phases over five years to create a total of seven.

Disney said Tuesday the expansion will focus on “universally understood” stories, adding that many of the new attractions will be unique to the Hong Kong park.

Construction is scheduled to begin by the end of this year, pending legislative approval of the government financing plans.

During its first year of operations in 2005, visitors to Hong Kong Disneyland fell 400,000 short of the park’s target of 5.6 million. In the park’s second year, attendance fell to four million visitors.
The second phase of expansion to the world smallest disneyland resort has been mired by the global downturn.

In March, Disney said it was axing about 30 Hong Kong-based employees that were planning the expansion after failing to agree financing with the city’s government.
Disney has borrowed more than $1bn for the project, including HK$6.1bn it owed the city’s government, due to be repaid over 25 years.
In 2008, the theme park was forced to amend loan agreements after it failed to meet performance targets.
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