Case Study Chase’s Strategy for Syndicating the Hong Kong...

Case Study Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan Analysts: Bian Min, Luo Min, Wang Hongyu, Zhu Haidong Syndicated loan, with two or more bank lenders and a single set of legal documents, have gained tremendous popularity among corporations to finance their projects. This report aimed at evaluating the process by which Chase Manhattan Bank (â€Å"Chase†) syndicated the HK$3.3 billion Hong Kong Disneyland financing. To begin with, a detailed analysis of the first-round bidding concerns will be provided, followed by a discussion on the ‘market flex’ terms in the standard commitment letter. After that, alternative syndication strategies will be examined, supplemented with the risk-return trade-offs of†¦show more content†¦In terms of pricing, it could quote an underwriting fee of between 100bp and 150bp, based on the analysis of comparable transactions. Moreover, these fees could be further lowered if Chase was awarded with the sole lead arranger mandate. Considering Chase’s competitive pricing, global leadership in syndicated finance and full commitmen t to the deal, Disney would most likely shortlist Chase in the first round. This is exactly what happened. In fact, Chase outcompeted other 5 shortlisted banks in the final round and gained the sole-mandate in leading the syndicated loan. 2. Singing the Commitment Letter Disney’s Concern We believe signing the standard commitment letter is not in Disney’s best interest and therefore not advisable. Viewing from Disney’s perspective, the ‘market flex’ provision in the standard commitment letter is significantly detrimental as it inflicts additional market volatility risk and uncertainty to Disney in the syndication process. It entitles Chase to subsequently adjust the features of the Facility including the terms, amount, structure and pricing given a change in Hong Kong Dollar market, which effectively transfers the underwriting risk from Chase to Disney. If Disney would assume such risks, there is no point in choosing a lead arranger of syndicated lo an through a bid, because the least expensive terms proposed are subject to change once interest rate fluctuates. It is somewhat