Cahse Manhattan Bank: Hong Kong Disneyland
MF 820: Management of Financial Institutions
Hong Kong Disneyland Finance
Ron Shell
Jiang Jiang
Zhaojie Wang
On August 10th 1999, Disney awarded the sole mandate to Chase Manhattan Bank for the Hong
Kong Disneyland financing of HK $3.3 Billion. We believe this decision was beneficial for both parties. For Chase, the rewards included underwriting fee, interest payments, being a part of a big loan-financing project in Asia and developing networks and relationships with Asian governments and companies. This outweighed the risks of underwriting risk, credit risk and long-term collateral risk. In addition, we believe it was the correct decision to initially bid to lose and then change this approach once there was concrete support from the HK government. From
Disney’s perspective, despite Chase’s standard commitment letter leaving them slightly vulnerable, choosing Chase as sole mandate made the most sense. Due to the unique nature of the loan (extreme long term, Disney’s desire to use operating cash flow for expansion and the principal collateral being non-existent for first 2 years), it made sense for Disney to choose a company that has a strong relationship with and one that was extremely flexible on the structuring of the loan. Finally, we believe the most suitable syndication strategy is to be Chase as the sole mandate with a two-stage syndication process and sub-underwriting (exhibit 8a)
Chase Manhattan Bank made a smart initial decision by attempting to bid to lose. This strategy was ideal because due to the uniqueness of the loan it posed several credit issues. Firstly it was extremely long (15 years). In addition, the problems of Disneyland Paris, which boasted large initial capital expenditures and an overly aggressive capital structure meant banks had to tread warily and do their due diligence. Also, Chase knew the local banks would bid aggressively.
However, because of their strong relationship with Disney and their reputation as
Hong Kong Disneyland Finance
Ron Shell
Jiang Jiang
Zhaojie Wang
On August 10th 1999, Disney awarded the sole mandate to Chase Manhattan Bank for the Hong
Kong Disneyland financing of HK $3.3 Billion. We believe this decision was beneficial for both parties. For Chase, the rewards included underwriting fee, interest payments, being a part of a big loan-financing project in Asia and developing networks and relationships with Asian governments and companies. This outweighed the risks of underwriting risk, credit risk and long-term collateral risk. In addition, we believe it was the correct decision to initially bid to lose and then change this approach once there was concrete support from the HK government. From
Disney’s perspective, despite Chase’s standard commitment letter leaving them slightly vulnerable, choosing Chase as sole mandate made the most sense. Due to the unique nature of the loan (extreme long term, Disney’s desire to use operating cash flow for expansion and the principal collateral being non-existent for first 2 years), it made sense for Disney to choose a company that has a strong relationship with and one that was extremely flexible on the structuring of the loan. Finally, we believe the most suitable syndication strategy is to be Chase as the sole mandate with a two-stage syndication process and sub-underwriting (exhibit 8a)
Chase Manhattan Bank made a smart initial decision by attempting to bid to lose. This strategy was ideal because due to the uniqueness of the loan it posed several credit issues. Firstly it was extremely long (15 years). In addition, the problems of Disneyland Paris, which boasted large initial capital expenditures and an overly aggressive capital structure meant banks had to tread warily and do their due diligence. Also, Chase knew the local banks would bid aggressively.
However, because of their strong relationship with Disney and their reputation as
References: Stefano Gatti , Project Finance in Theory and Practice: Designing, Structuring, and Financing Private and Public Projects.