Chase-Disney Essay example
Case Study 4
Case Study 4
In late 1999, the Walt Disney Co. and the Hong Kong government agreed to develop Hong Kong Disneyland, a theme park and resort complex worth HK$28 billion, which planned to open in late 2005. The selected underwriter, Chase Manhattan Bank, needed to raise HK$3.3 billion of non-recourse bank loans for construction and working capital of the project.
The key concerns facing Chase were whether to bid at all, how to bid and how to structure the syndication to meet the borrower’s needs and its own profit objectives and the market’s expectation for …show more content…
Chase would cooperate with 2 other banks to commit the joint underwriting and skip the sub-underwriting phase. This strategy involves 18 banks at 4 levels. Chase and other two banks would underwrite HK$1.1 billion respectively and contribute HK$300m in the general syndication. The other participants including 4 arrangers at HK$250M, 6 co-arrangers at HK$150M and 5 lead managers at HK$100M respectively.
This strategy required only 2 additional underwriting commitments instead of 4 compared with Strategy 1, which would decrease the underwriting risk for Chase but it would also decrease the underwriting fee revenue by two-thirds as well as the league table status. Moreover, it would increase the negotiation difficulties as Disney needs to contact the three underwriters instead of one and Chase would lose its lead role in the syndication process.
* Strategy 3:
Chase would act as the sole mandate arranger, which skip the sub-underwriting process and start the general syndication directly. 21 banks involved including 4 arrangers at HK$250M, 8 co-arrangers at HK$150M and 8 lead managers at HK$100M respectively, which result in the largest syndicate as measured by the number of banks.
Compared with Strategy 1 and 2, this option significantly improved Chase’s