Project to be started from 2000, Sponsors: Hong Kong Government and Walt
Disney
Cost of the project: HK$ 14 Billion, HK$ 3.3 Billion to be financed by syndicated
bank loan.
Hong Kong Disneyland invited 17 major banks to bid on the project financing
and Chase was chosen as the lead arranger with a commitment to underwrite
to full amount.
Sponsors:
Hong Kong Government:
Joined China in 1997, it has high degree of autonomy under the Peoples
Republic of China.
Free market economy, unrestricted capital movement, low tax rates
Stable Hong Kong Dollar ( HK$ 7.80= US$ 1.00 since 1983) and duty free port
Fell into recession following the Thai currency crisis in 1997, though some
recovery seen in mid 1999
The Walt Disney Company:
Established in 1923, it has become multinational, multimedia entertainment
giant.
Business segments: Theme parks and Resorts, Media Networks, Studio
Entertainment,
Consumer products, and Internet/Direct marketing
Annual revenues: $20 Billion, Operating cash flow: $5 Billion, A debt rating
Disneyland Paris theme park had experienced finance problem due to
aggressive capital structuring
with 75% of the project financed by debt.
To avoid bankruptcy, Disney agreed to forgo some of its management and
other fees.
Project features:
Strategy of Hong Kong Disneyland was to start small and then add capacity
over time as demand grows.
The project would have three phases. Phase I included a Disneyland style park
offering several themed lands featuring Disney rides and attractions
Phase II and III were less defined, but included options to develop adjoining
sites at some points in future.
Park to be constructed in coastline by reclamation of land from ocean side. H.
K. Government agreed to extend coastline
and construct roads and utilities at its expense.
Government supported the project because of the sizable public benefits it
would generate through employment.
Expected rate of return on investment is 17% to 25% per annum, with atleast
6% per annum under worst case scenario.
Land reclamation work would start at the end of 2000, resort construction
would start in 2002 and the park would be ready
for operation by late 2005.
Financing of the Project:
A new corporation, Hong Kong International Theme Parks Limited (HKTP) would
construct, own and operate the resort.
Of the total construction cost of HK$14 billion H. K .Government and Disney
would provide HK$ 3.25 billion and HK$ 2.45 billion of equity respectively. In
addition to that, H. K. Government would provide a long term loan of HK$ 6.1
billion with repayment starting from year 16th of operation till 25th year.
Thus HKTP was falling short of HK$ 2.3 billion. So, it decided to raise HK$ 2.3
billion 15 year, non recourse term loan for construction and a HK$ 1 billion,
nonrecourse revolving credit facility for working capital needs post
construction.
HKTP invited its relationship bankers and other bankers to raise HK$ 3.3 billion
non recourse loan package on fully underwritten basis and expected to select
up to 3 lead arrangers for the transaction.