Need to evaluate the risks (credit and syndication) and returns (financial and reputational)
- What are the deal’s key risks and profit potential for Chase? Analyze Chase’s pricing strategy. Risks * Joint mandate → lower underwriting fees
* Aggressive competition → reduces profitability
* Disney’s bad track record
* Credit issues (long maturity, limited collateral, CFs to be used for CapEx, no willing to subordinate management fees and royalties to debt service) * Fully underwritten deal → underwriting risk
Reasons to bid
* Chase wants to maintain its relationship with Disney
* Might enhance Chase’s reputation in the region
* Despite the risks, might be profitable if the deal is designed carefully
- What are the tradeoffs of the market flex provision for Chase and Disney?
- How should Chase design the syndication strategy (general vs. sub-underwriting, syndicate size, loan shares etc.)? * Sub-underwriting is an optional, “wholesale”, phase of syndication and the general syndication is the “retail” phase * Sub-underwriting allows Chase to reduce underwriting risk and expedite the syndication process. However, the underwriter loses fees and league table status… * Some borrowers may request sub-underwriting to reward certain relationship banks with senior status and increased compensation...