Disneyland Hong Kong
In this case analysis I will first show the requirements the company had for its financing. Then I will
provide an analysis of the main pros and cons for Chase in connection with the deal. Lastly I will show how
both affected the pricing as well as the execution of the deal.
In order to build the new Disneyland in Hong Kong a new non-recourse entity, Hong Kong
International Theme Parks Ltd (HKITP) was formed. While the owners supported the project with substantial
amounts of equity (Disney and Government) as well as with subordinated debt (Government), Disney had
significant requirements for the financing portion of the remaining needed amount. Disney was looking to
receive bank financing for this new entity of HKD 2.3bn as a Delay Draw Term Loan (“DDTL”) plus HKD
1.0bn working capital line (“Revolving Credit Facility” or “RCL”). While they had learned from their most
recent experience with Disneyland in Paris not to have a too aggressive capital structure in place, they
nevertheless demanded significant flexibility with regard to the following terms and conditions:
- 15 year tenor
- delayed amortization structure which would start as late as 3 years after the opening of the park,
i.e. 8 years after closing of the loan and 6 years after funding of the loan
- allowed CAPEX for further expansion (instead of using FCF for amortization)
- full underwriting of the deal by up to 3 Lead Arrangers
- no subordination of management and royalties
- main collateral for the deal (land) would only become gradually available as the government first
needed to reclaim the land
Not only did Disney remain conservative with regard to the overall capital structure (see Exhibit 5 in case) but
they also chose to access the markets in ...
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