Chase Disney Case

1835 Words Nov 14th, 2014 8 Pages
Chase-Disney Hong Kong Syndication

Q1. How should Chase have bid in the first round competition to lead the HK$3.3 billion Disneyland financing?

Why Chase initially intended to bid-to-lose?
1. The syndication term is long-term, 25 years tenor which banks did not like, and not as per the norm of the region’s syndications’ usual tenor of 3-5 years.
2. Disney land Paris struggles were still fresh in memory, and raised the default risk concerns for sponsors
3. 3 lead arrangers condition by the sponsor would mean a bigger portion of the overall fee would be shared.

Why Chase changed their bidding approach from bid-to-lose, to bid-to-win?
1. Liquidity improved in the local market and therefore, spreads on syndicated loans were continuing to
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Furthermore, the participation of Hong Kong banks, that raise deposits in HK Dollars, will mitigate this risk largely.

Q3. What syndication strategy would you recommend for the loan and why? Be specific in terms of number of tiers, amount of commitments and fees for each tier, nationality and number of banks, final hold positions, sub-underwriting vs. general syndication, etc.

Lets start with a Pros vs Cons comparison of the syndication realities:

Pros
Cons
1. The economical outlook suggests an upcoming interest tightening period, and an increase in liquidity supply, which means the higher interest return spread of the syndication than the average discussed and proven earlier, will make the syndication a more attractive opportunity to lenders
1. The project is a real estate development in its essence, turning a rural big peace of land into a serviced attractive location, but will not exist (after land reclamation) before another two years (no real asset as such)
2. The commitment feedback received from the regional and international banks are positive and indicating 57%

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