Case Study: Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan (a)

2389 words 10 pages
Case Study: Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan (A)

Q1. How should Chase have bid in the first round competition to lead the HK$3.3 billion Disneyland financing?
1.Three ways to approach this deal
1) bid to win, 2) bid to lose and3) no bid. Chase chose to bid to lose on the first round, but just enough to make it to the short list. Also, since Chase is one of Disney's relationship banks, Chase would not want to ruin this relationship by not bidding on their project.
If Chase wanted to lead the competition from the first round, they should have made a bid that was more aggressive and aimed to win. This bid would have been closer to the desires of Disney, making them more appealing and
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They should include a clause that states minimum payments as soon as the park starts running, even if they increase later to accommodate to a possibility of initial low demand. They could establish payments as a percentage of revenues or profit margin (with a minimum quantity that serves as a low boundary for payments). Then, as the park's revenues become more stable they might establish a fixed amount (maybe after 3 years --the period in which they were supposed to start repayment). This would ensure the bank some cash flow from the beginning instead of waiting for three years after the project's completion

Q3. What syndication strategy would you recommend for the loan? Think in terms of the number of tiers, commitments and fees for each tier, nationality and number of banks, final hold positions, sub-underwriting vs. general syndication, etc.
First we consider three strategies that Chase was considering.
Strategy 1--Sole-mandated with sub-underwriting
This strategy involves 4 tiers, 15 banks. Chase is the title of lead arranger, in order to protect itself from the full amount lending, they gather four other banks as sub-underwriters, so there would be 5 lead arrangers while Chase can be viewed as the sole mandate with rights to dividing all fees.
There are some advantages to take this strategy: (1) Chase doesn’t have many exposure in Asian; this is a good opportunity for it to make a brand and build relationship local business. (2)