Disney HK Chase

8/10/2019 Disney HK Chase

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Chase’s Strategy forSyndicating the HK Disneyl

LoanGroup A5:

Parvathy Rajan PGP/17/100

Divya Thomas PGP/17/140

Leah Zacharias PGP/17/150



Chase’s Standard Commitment Lette

Terms of the Loan:

Loan tenor= 15 years

Repayment moratorium= 3 years

Permitted ongoing capital expenditure using operating cash flows without putting ccovenants in place; hence greater freedom to sponsors to expand

Agreed to underwrite entire amount of loan

What Chase wants in return:

Pricing:

Minimum Debt Service Coverage ratios as decided

Standard “Market Flex” provision/ Standard Clause



Standard Clause: What’s the fuss?

Contents:

Syndication couldnot be completed

IF because ofchanges in the HK

Dollar market..

Chase can, inconsultation with

Disney and HK

Govt. change anyor all of these toensure complete

syndication

Structure- howmuch is sub-

underwritten, et

Amount of th

Pricing- spread oLIBOR/HIBOR f

each classificat



Disney, Chase and the Standard Cla

While Chase has undertaken to underwrite theentire loan amount, any untoward change in theHK Dollar market would trigger an event (which isentirely out of the control of either of the parties)which would change the terms of the deal

In essence, this potentially renders the 100%

underwriting pointless- if there are no takers in thebank market because of changes in the HK Dollarmarket, the syndication could be restructured

Should Disney sign the ag

Yes, Disney should sign the clause co

Chase has never had to invothe Asian market even in fina1997-99

Given current market conditSeng Index shows strong gro

The trigger for the clause is inmarket, which has been kee~HKD 7.5 to USD 1 for the pa

Why Disney dislikes the clause

Negotiating: Finding a middle ground Given that the clause completely invalidates the complete underwriting deal, the two par

negotiate the terms of restructuring in case of dire market consitions



Syndication Strategies

Strategy Final hold positions Chase: Exposure Disne

Chase- Sole MandateSub-underwriting- Yes# of tiers= 5# of banks= 15

1 Mandated Lead Arranger= $300 Lower exposure for Chaseas compared to solemandate without sub-underwriting

Admimin.

Have bank

4 Lead Arranger= $300

4 Arranger= $250

4 Co-Arranger= $150

2 Lead Manager= $100

Chase+2 --> Joint MandateSub-underwriting- No# of tiers= 4# of banks= 18

3 Mandated Lead Arranger= $300 Chase’s league tablenumbers could beaffected;Underwriting fee will beforgone

Disnesettle smalle

4 Arranger= $250

6 Co-Arranger= $150


Chase- Sole MandateSub-underwriting- No# of tiers= 4# of banks= 21

1 Mandated Lead Arranger= $300 Greatest degree ofexposure, compensatedby underwriting fee andwill also boost leaguetable status

An ev

than twith s

4 Arranger= $250

8 Co-Arranger= $150




Selecting a Syndicating Strategy

From Disney’s point of view

Would prefer awarding sole mandatewith sub-underwriting, but with asmaller number of banks

From Chase’s point of view

A joint mandate would affect leaguetable numbers and loss ofunderwriting income; instead, a solemandate would increase exposure

Disney awarded Chase sole mandate

Considering the interests of strategy with no sub-underwadopted:

For Chase- Credit and Syndhigher compared to other ssame is compensated for b

The next point of decision mshould be included becaus

For Disney- Involvement of lomean greater political suppother banks of deal quality

Exchange rate fluctuations

impact because local bankin HKD

Disney HK Chase

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