FINA 3088 Case Study 1 ---- Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan (A)&(B)
Bid Strategy of the First Round
The first round bid was to show its commitment and price, while detailed proposal would be submitted after being shortlisted. Thus, Chase had mainly three kinds of concern at that stage: risk, profit and reputation.
Reputation
From Exhibit 6, there is no doubt that Chase was the top bank in syndicated finance in the US and over the world. However, it recorded limited performance in Asian market though Chase had put numerous resources into its global group. At the same time, Chase was among Disney’s top relationship banks and Disney as well as its project in Hong Kong had a noticeable market signal.
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Although Chase argued that this term is rarely invoked and in Asia they have never invoked it, Disney was paying for a fully underwritten deal expressly to avoid syndication risk, especially the amount of the loan. If the syndication amount suddenly changes in the economy crises, it may bring serious trouble to the Disney’s operation and financial stability. At the same time, if the price were to increase dramatically, it would be a high burden for Disney to pay the interest.
Since Disney is one of the large clients, Chase may have to do some amendments to smooth the negotiation process. As chase, to remove or alter the rights to change the amount of the syndication may be acceptable as most of the loan have been assigned to other banks. However, some flexibility in terms of the pricing must be guaranteed to ensure the profitability of Chase in some certain economy downturn.
Syndication Strategy for the loan
We now discuss the syndication strategy in terms of the following components:
Number of Tiers ---- fewer tiers
It can be argued that more tiers can increase the number of banks to involve, thus
The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions
JPMorgan Chase is one of the oldest financial services company dating back over 200 years. It has $2 trillion in assets and operations in more than 60 countries. JPMC’s corporate strategy is it provides services and products in major capital markets. JPMorgan Chase, well known nationally and globally, is leading in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity.
Lower inflation makes the market more stable, enabling JPMorgan Chase customers to get credit at a lower interest rate. “Government green drive also opens an opportunity for procurement of J.P. Morgan Chase products by the state as well as federal government contractors.”, which means new tax policies may have a significant impact on the way they operate and provide new opportunities for more profitable capabilities for existing participants such as JPMorgan Chase. The new technology provides opportunities for JPMorgan Chase to implement a differentiated pricing strategy in new markets. This will enable the company to maintain its loyal customers with good service and attract new customers
Chase Bank is a national bank and constitutes the consumer and commercial subsidiary of JP Morgan Chase. Chase Bank traces its origins to Manhattan Bank, created by Aaron Burr (The History of JP Morgan Chase & Co., 2008, p.2). Chase was the first tenant at the Rockefeller Center and was later on led by David Rockefeller in the 1960’s (Wilson, 1986, p.87). The famous Bank One became part of Chase in 2014, and the regrettable Washington Mutual, under receivership, was sold to Chase at a bargain during the crisis of 2008 (The History of JP Morgan Chase & Co., 2008, p.19).
"At JPMorgan Chase, we want to be the best financial services company in the world. Because of our great heritage and excellent platform, we believe this is within our reach."
Disney’s tentpole strategy has been fairly successful throughout the Disney Studios lifetime. Even though this strategy worked in the past it may not be the best strategy moving forward, as there are advantages and disadvantages to this strategy. One advantage of this strategy is that the tentpole films attract movie going customers that think of the movies more as an event rather than just a film they want to see.“A $200 million movie is more likely than a $20 million movie to have elements that appeal to moviegoers--to have special value for them.”, said Horn. Just as with any bet, there could also be a risk and disadvantage. If the film fails, they would both have to take the fall instead of just Disney Studios. “When our
From Disney's standpoint, they should sign the commitment letter. Chase has had maximum flexibility with the desires of Disney. Chase has probably allowed terms that other banks would not have been so easy to accept, which might be because of the strong relationship between the bank and Disney. The only clause that might concern Disney is the "Market flex provision". However, given how flexible Chase is being with most of the terms, it is only reasonable that they protect themselves from some of the risks involving the Hong Kong Dollar fluctuations. It is as Chandiramani, of the Chase deal team, argued: "Things can change between the time you sign a deal and the time you try close it".
Banks have been at the forefront of the financial system for as long as they have existed and have captured the attention of stakeholders on both controversial grounds as well as being undisputed with regards to the many helpful services they provide. JP Morgan & Chase is one such bank, surrounded by hostile news articles and excessive scrutiny but rightfully so as it has of recent been the topic of much controversy as turning a blind eye to the moral codes established by the Securities and Exchange Commission (SEC) and assisting Ponzi Scheme masterminds in swindling unsuspecting investors.
The aim of this report is to recommend whether or not a publicly traded company has been is worth investing in. The company chosen in this case is JPMorgan & Chase which is a large financial institution. This report is going to use a financial rational formed by the analysis of various financial metrics.
“ Our mission is to be a Premier Bank in the Asia- Pacific region, committed to providing Quality Products and Excellent Customer Service.”
The banking industry is highly competitive. The financial services industry has beenaround for hundreds of years and just about everyone who needs banking servicesalready has them. Because of this, banks must attempt to lure clients away fromcompetitor banks. They do this by offering lower financing, preferred rates andinvestment services. The banking sector is in a race to see who can offer both the
Another concern for Disney should be the fact that if the company sign the market flex terms, Chase would be over-charging underwriting fees which aim is usually to cover
The Competitive Profile Matrix indicates that JPMorgan Chase has the highest weighted score of 2.81 which is an indication that they are leading in the Banking industry over Bank of America with a score of 2.65 and Wells Fargo in third place with a score of 2.51. None of the three banking institutions fell below the average of 2.5 which is considered a weak position. Some of the contributing factors are as follows: On Financial Strength in 2015 JP Morgan Chase had assets of 2.39 trillion dollars, and Bank of America’s assets was at 2.17 trillion dollars, while Wells Fargo trailed with assets of 1.44 trillion dollars. On Technology initiatives, in addition to the large amounts of resources assigned to banking technology, JP Morgan Chase has a technology budget of 500 million dollars for Cyber Security; Bank of America invested 400 million, while Wells Fargo spent 250 million on Cyber Security.
Tokyo Disneyland was opened to the public on April 15, 1983. This amusement park was owned and operated by an unrelated Japanese corporation. The Walt Disney Company received royalties, paid in Yen, on certain revenues generated by Tokyo Disneyland. This new overseas business venture was bringing some concern about the foreign exchange risk to Disney. The management team at the Disney has been considering hedging future Yen inflows from Disney Tokyo since 1985. Mr. Anderson, the director of finance at The Walt Disney Company, focused his attention on a possible 15 billion ten-year term loan with an interest rate of 7.5% paid semiannually. On the other hand, Goldman Sachs, who had been working with
“We aim to become a super regional bank. This involves growing our presence in the Asia pacific region and sourcing 25-30% of earnings from our Asia Pacific Europe and America division by 2017, while also being very focused on growth in our core domestic businesses in Australia and New Zealand.”