Hk-Disney Syndication by Chase
Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan
Group 15
XIA Yidan, ZHANG Kuo, ZHU Shihuai, WANG Qian
2012 acer CHUK
2012/9/24
Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan
Group 15
XIA Yidan, ZHANG Kuo, ZHU Shihuai, WANG Qian
2012 acer CHUK
2012/9/24
How should Chase have bid in the first round competition to lead the HK$3.3 billion Disneyland financing (Bid to win or bid to lose?)
In the first round of competition, there are 17 banks competing to propose a mandate for syndication. How should Chase make the proposal to Disney depend on the following respects: (1) Disney’s requests (2) Evaluation of the returns and risks. Based on the previous two parts, design the bidding strategies.
(1) Disney’s requests
According to the term sheet developed by Disney for the loan transaction, Disney’s main request for the bank financing can be summarized as follows: a. Amount: HK $3.3 billion b. Underwriting method: full underwrite c. Tenor: 15 years d. Number of lead arranger: up to 3 e. Seniority: management fees and royalties ahead of debt service
(2) Evaluation of the return and risk
* Fees for syndication services and reputation gain
The fees for syndication services are closely related to the syndication structure. For full underwriting, Chase would get the whole underwriting fee if it is the sole mandate. However, Disney prefers to mandate up to 3 lead arrangers, and Chase will have only 1/3 of underwriting fee in this case. Further, being lead arranger has reputation gain for Chase.
But trying to be the sole mandate and lead arranger put the pressure on Chase to bid aggressively. Especially they expect local banks were tend to make an aggressive bidding, whether bid to lose or bid to win is largely decided by the interest rate risk, credit risk and syndicate risk.
* Interest risk
The bank loan has two parts: HK$2.3 billion, 15-year nonrecourse term
Group 15
XIA Yidan, ZHANG Kuo, ZHU Shihuai, WANG Qian
2012 acer CHUK
2012/9/24
Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan
Group 15
XIA Yidan, ZHANG Kuo, ZHU Shihuai, WANG Qian
2012 acer CHUK
2012/9/24
How should Chase have bid in the first round competition to lead the HK$3.3 billion Disneyland financing (Bid to win or bid to lose?)
In the first round of competition, there are 17 banks competing to propose a mandate for syndication. How should Chase make the proposal to Disney depend on the following respects: (1) Disney’s requests (2) Evaluation of the returns and risks. Based on the previous two parts, design the bidding strategies.
(1) Disney’s requests
According to the term sheet developed by Disney for the loan transaction, Disney’s main request for the bank financing can be summarized as follows: a. Amount: HK $3.3 billion b. Underwriting method: full underwrite c. Tenor: 15 years d. Number of lead arranger: up to 3 e. Seniority: management fees and royalties ahead of debt service
(2) Evaluation of the return and risk
* Fees for syndication services and reputation gain
The fees for syndication services are closely related to the syndication structure. For full underwriting, Chase would get the whole underwriting fee if it is the sole mandate. However, Disney prefers to mandate up to 3 lead arrangers, and Chase will have only 1/3 of underwriting fee in this case. Further, being lead arranger has reputation gain for Chase.
But trying to be the sole mandate and lead arranger put the pressure on Chase to bid aggressively. Especially they expect local banks were tend to make an aggressive bidding, whether bid to lose or bid to win is largely decided by the interest rate risk, credit risk and syndicate risk.
* Interest risk
The bank loan has two parts: HK$2.3 billion, 15-year nonrecourse term