Chase’s Strategy for Syndicating the Hong Kong Disneyland Loan

PEPPERDINE UNIVERSITY

THE GEORGE L. GRAZIADIO

SCHOOL OF BUSINESS AND MANAGEMENT

LEN RUSHFIELD

FIN 667

SPRING 2018

INDIVIDUAL ASSIGNMENT

CHASE’S STRATEGY FOR SYNDICATING THE HONG KONG DISNEYLAND LOAN

JUNYAN KOU

CWID: 100587415

1. Chase’s International Strategy

Chase, as the third largest bank in United States in 1999, took a leading place in syndicated finance. Also, it took up 34% of total syndicated loans by dollar volume in the U.S. market which pronounced its dominative position in 1999. However, with the rapid development of economy globalization, Chase was no longer satisfied with being the leader in domestic market and began to explore foreign markets. Faced with so many competitors all over the world, it was impossible for Chase to seize all of the financial fields. Therefore, Chase distinguished itself by being a unique investment bank other than simply issuing loans from all other banks. In order to enter the global market, Chase formed its global syndicated finance group with 400 professionals distributed in major capitals all over the world and laid its main emphasis on syndicated lending. This global strategy enabled Chase to deal with tough deals with enough people and great coverage. What’s more, years of outstanding performance made Chase a well-known bank in the world market and this offered more opportunities for Chase to build up good relationships with other famous corporations and financial groups.

1. Country Risk Evaluation

It was true that Hong Kong, as a special administrative region, had lots of uncertainties which could increase the country risk of the Disneyland project. However, Hong Kong government not only provided HK$3.25 billion of equity, but also agreed to offer HK$6.1 billion in subordinated debt. This indicted that the local government was eager to boost the economy after the recession and picked Disneyland project as an opportunity to improve the tourism. In addition, such a large project would surly increase the employment. So, the Disneyland project was a great chance for Chase to expand its operations under the government’s support. What’s  more, the new system of Hong Kong provided an ideal investment environment which offered low taxes, unrestricted capital movement, a stable currency and a duty free port and all of these arose Chase’s confidence in growth in Hong Kong economy.

Admittedly, China’s fast growth may bring about unpredicted threats but chase was a large bank with mature operating system and platform and it had the ability to handle such a huge project. Furthermore, engaging with Hong Kong banks ensured Chase with political support and enough information access to the market.

As for the political risk, it would take two years for the land reclamation to be done which meant if the citizens lived near Disneyland area or environmentalists be strongly against the construction, there would be possibility that the project postponed. Therefore, the opportunity cost was growing higher as the time passed. Hong Kong had its Own Independence Commission against Corruption so the bribery was no longer a big concern.