Hongkong Disney

Assignment of HongKong Disneyland

1. How should Chase have bid in the first round competition to lead the $HK3.3 billion Disneyland financing?

According to possible risks and returns, there are three options for Chase to bid in the first round competition: Bid to lose, Bid to win, and No bid.

It is almost impossible for Chase to not bid because it will give negative influence on the reputation of the company. Bidding to win will cause fewer earnings for Chase since it means the company has to satisfy Disney’s request for three lead arrangers for the loan.

On the other hand, bidding to lose will be best choice. Given that Chase will also bid aggressively enough to make the short list for this high profile deal, not only the method will keep the relationship with Disney, but also it would have to be on terms that meet the company’s earnings targets if Chase happened to win the mandate.

2. As Disney, would you sign the standard commitment letter? Which part might concern you and why? As Chase, which part are you willing to alter or remove?

As Disney, I worry about “market flex” in the standard commitment letter. If the syndication has not been completed because of a change in the Hong Kong Dollar market, Chase will be able to change the structure, terms, amount, or pricing of the Facility. Considering Asian financial crisis of 1997~1999, there is still possibility of fluctuation in the Hong Kong Dollar market.

As Chase, I have to consider the possibility of any change happened from the time the deal is signed and the time all the parties are working on closing it since it is the long term loan with 15 years maturity. Also, I don’t want receive subordinate management fees and royalties mentioned by Disney. And oceanfront land as Disney’s principal asset does not exist at the moment of the commitment letter drawing. Moreover, the worst outcome might be Disney would have no fallback collateral to go to the underwriters. So I would like to remove those terms...