Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (A&B) Harvard Business School Publishing
Case Nos.: A Case: 201-072 3/1/01; B Case: 201-086 3/1/01; Teaching Note: 5-201-097 3/7/01
Posted: 5 Jun 2001
SUBJECT AREAS: project finance, syndicated lending, financial strategy, Asia, emerging markets, investment banking, commercial banking
CASE SETTING: August/October 2000, investment banking, entertainment industry, $3.6 billion investment
In December 1999, the Walt Disney Company and the Hong Kong Government agreed to develop Hong Kong Disneyland, a HK$28 (US$3.6) billion theme park and resort complex with a scheduled opening date of 2005. As part of the total financing package, the sponsors decided to raise HK$3.3 billion of non-recourse bank loans for construction and working capital, and selected Chase Manhattan Bank to underwrite these facilities. The A Case concerns the process by which Chase successfully competed to lead this transaction. The key questions facing Chase were whether to bid at all, how to bid, and how to structure the syndication to meet the borrower's needs, its own profit objectives, and the market's expectation for an attractively priced credit. The case includes a generic section about the process, participants, and economics of syndicated lending for students who are unfamiliar with the practice. The B Case presents the results of the general syndication in October 2000, and illustrates the issues for Chase in allocating final commitments. The B Case also raises the fundamental question of whether the syndication was a success.
The case illustrates: 1) the process, participants, and economics of syndicated lending (a market that now exceeds $2 trillion annually); 2) the key issues in designing a syndication strategy (e.g. how many banks to invite, which banks to invite, what fees to offer, and what share of the loan to hold in the end); 3) the importance of relationships in syndicated lending. Although this case was written for a course on project finance, it can easily be modified for courses on corporate finance, capital markets, investment banking, or financial institutions.
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