Journal of Applied Corporate Finance is available online through Synergy, Blackwells online journal service which allows you to: The views and opinions expressed in this journal do not necessarily represent those of the Publisher, Morgan Stanley, its afliates, and Editor, neither does the publication of advertisements con-stitute any endorsement by the Publisher, Morgan Stanley, its afliates, and Editor of the products advertised. Practice and Documentation, London: Of the 42 banks that declinedto participate, 25 cited concerns about the tenor final maturity , eight cited concerns over pricing,three cited concerns about funding a Hong Kongdollar loan, three cited concerns over Hong Kongexposure or credit, and three could not getinternal credit approval for the deal. Smaller syndicates compris-ing banks with larger loan shares are more effectivemonitors of borrower performance.
And so, we decided to bid lessaggressively without fear of losing. Euromoney Books, , 3rdedition. Practice and Documentation, London: It might also set Chase apart from other banks thatwere unable to commit to underwrite the full amount. Anyattempt to draw lessons from this case study mustconfront two problems. In either case, thelead arranger, often in consultation with the bor-rower, determines the final allocations.
The separateness has given him the standpoint whence he has been able to observe and describe the commonplaceness with which in spite of his separateness help on writing college admission essays he is in vital sympathy. When funding certainty is critical, borrowersoften request fully underwritten bids, meaning thatthe lead arranger s must commit to provide the fullamount of the loan on specific terms and pricing.
If Chase isthe sole-mandated lead arranger and there lloan a groupof four sub-underwriters, the fees are broken downas follows. The general syndication serves todistribute the loan to a bank group that is large. The key to success in this business is beingclose to the market. We just had toresist the temptation to be too greedy.
Archives February September Thelead arranger then engages legal counsel to preparean initial draft of the loan documentation. The ‘Get Big Fast’ Strategy. First stage of the syndication. Disclaimer The Publisher, Morgan Stanley, its afliates, and the Editor cannot be held responsible for errors or any consequences arising from the use of information contained in this journal.
The idea was to rapidly scale the business to the point where they could generate incremental revenue streams from related businesses e. After closing, borrowers pay commit-ment fees on any loan disneylland that is committed, butunborrowed, plus interest on the amount that isborrowed.
Project finance loans are studied by B. Alternatively, Disney could have re-quested more favorable loan terms.
In addition, they presented a list of target banksto show how the syndication was likely to play outand to illustrate their knowledge of the local bankingmarket. Mostprevious academic research into debt policy hasfocused on such topics as determining an optimalcapital structure, choosing between private bankdebt or private placements and public bonds, orselecting among various loan features such as shortvs.
STRUCTURING LOAN SYNDICATES: A CASE STUDY OF THE HONG KONG DISNEYLAND PROJECT LOAN – EconBiz
Leave us a Reply Cancel reply Your email address will not be published. Banksin each tier of the syndicate have titles based on theircommitment amount. The per-bank commitment amount that has been accepted for each tier in the syndicate. We may need even sterner teaching than any we have yet had, but we have faith that the lesson will be structuring loan syndicates a case study of the hong kong disneyland project loan learned at last.
Table 1 describes the calculation of deal fees fora sole-mandated loan with sub-underwriting.
STRUCTURING LOAN SYNDICATES: A CASE STUDY OF THE HONG KONG DISNEYLAND PROJECT LOAN
Canadian mail is sent by Canadian publications mail agreement number Most large banks have a syndicated financegroup that specializes in these deals.
Here, Dismeyland intend to illustrate how syndicate structureaffects compensation and exposure.
In selecting a final hold position for risky loans,a bank must evaluate two sets of conflicting objec-tives. Toinduce banks to take larger positions, Chasewould have to offer more in fees.
This amount will be reflected in the final loandocumentation and is the amount on which closing fees are calculated. Syndicate size declines in moderate and high-risk countries; see B.
The lead arranger prepares andsends an information memorandum containing adetailed description of the borrower and the trans-action to each bank.
In terms ofthe five criteria for determining success, Chaseappears to have met two or three of them dependingon ones assessment of the criteria:. Typically, borrowers permit someflex in pricing, say 25 basis points, as well as incertain covenants, but are less willing to permit flexin amount.
The lead arranger is responsible for negoti- ating key terms and covenants with the borrower, inaddition to analyzing credit qualityalthough eachbank participating in the syndication is ultimatelyresponsible for its own credit analysis and review ofdocumentation. For more information about Blackwell Publishing journals, including online ac-cess information, terms and conditions, and other pricing options, please visit www.
If wehappened to win the mandate, it would have to be onterms that met our earnings thresholds Koan submitted its package on schedule andlearned on May 25th that it, along with five otherbanks HSBC, Bank of China, ABN-Amro, Citibank,and Fuji Bankhad been short-listed for the man-date. Other banks get therequested amounts with no scale-back. Arranging banks also receive compensation forstructuring deals.