The Mickey Mouse that roared
Almost a year after the last major theme park deal ? Universal
Studios Japan ? it is Asia that again stokes this niche area of the
market with the HK$3.3 billion ($423 million) Hong Kong
International Theme Parks financing.
The Walt Disney deal should demonstrate whether the Asian consumer spending market is still buoyant, and whether the US brand can catch on quickly in Hong Kong after a previous foray into Europe sparked an initially frosty response. As the second park in the region after Tokyo Disneyland, the venture will consolidate the famous mouse's place in the consciousness of an increasingly prosperous market.
Disneyland Hong Kong is perhaps better described as a PPP deal since the project company is 57% owned by the Hong Kong government and 43% by the US media conglomerate. The government will cover more than 80% of the costs of the project, as well as a great deal of associated infrastructure work. Many local observers believe that Disney got an extremely good deal, suggesting that this is the result of a wish on the part of Hong Kong authorities to build a tourist hub that would put Singapore and Shanghai into the shade.
The park will be built on land on Lantau Island in the territory's Penny Bay, with a large proportion of the proposed site to be reclaimed from the sea. This work, which will be carried out by the Hollandsche Beton Groep, will be on the account of the government, part of the HK$14 billion in work that has to be done above the cost of actually building the park. A series of rail lines and a dedicated port will also appear on the site before it opens in 2005, and will again be the government's resposnibility.
A large part of the rationale behind the development of the park is the prospect of large numbers of low-end jobs in a city that is still very much the victim of its own success ? it cannot find enough low-end jobs to support a growing population. This is why it has welcomed Disney's HK$2.45 billion in equity and the promise of 35,000 jobs associated with the park if it reaches predicted visitor numbers.
Chase Manhattan Asia was mandated as lead arranger on the deal in August and has been able to speedily bring in six other banks as joint lead arranger and a further 24 at lower levels. It is proof, if any were needed, that Chase's dedicated team of leisure financiers has been able to adequately compensate for the recent loss of its retail operations in the region. And whilst the large sums of government money poured into the park mean that failure is very unlikely, a theme park, with its reliance on unsteady visitor numbers, is not the most iron-clad of credits.
The financing breaks down into a term loan of HK$2.3 billion and a revolving credit of HK$1 billion. Both tranches carry a tenor of 15 years and an average life of 10.9 years. The margin on the loans is 100bp over the Hong Kong Interbank Offered Rate (HIBOR) for the first five years, 125bp for years six to 10, and 137.5bp for the final five years, reflecting the strong support of the two sponsors.
The six banks joining Chase for a take of HK$130 million and lead arranger title were BNP Paribas, BOCI Capital, Crédit Agricole Indosuez, Fuji Bank, HSBC Investment Bank and Standard Chartered. Arrangers, for HK$105 million, were Abbey National Treasury Services plc, Agricultural Bank of China (Hong Kong), Banca Nazionale del Lavoro SpA (Hong Kong), Bank of Communications (Hong Kong), Bank of East Asia, Bayerische Landesbank (Hong Kong), Chekiang First Bank, China Construction Bank (Hong Kong), DG Bank (Hong Kong), Hang Seng Bank, Industrial & Commercial Bank (Asia), Keppel TatLee Bank (Hong Kong), Overseas Union Bank (Hong Kong), Shanghai Commercial Bank, Tokyo-Mitsubishi International (HK), Wing Hing Bank and Wing Lung Bank.
Three banks took co-arranger titles ? Asia Commercial Bank, Bank Austria Creditanstalt International AG (Hong Kong) and Sanwa Bank ? for commitments of HK$85 million apiece.
And lead managers comprise Dah Sing Bank and International Bank of Asia, contributing HK$70m each, and Citic Ka Wah Bank and Liu Chong Hing Bank, both lending HK$62.5 million.
It is just over a year since the initial agreement was signed and a certain amount of work has already been carried out on the site. Indeed, the project has already aroused small pockets of opposition in the territory, in particular from local fishermen and environmental campaigners who feel that an insufficient level of due diligence has been carried out to determine future toxic liability. London's Millenium Dome, for instance was forced to undertake an extensive clean-up operation, with all of its associated costs, on cheap, but contaminated land.
Even more intractable is the question of the park's identity. As a major shareholder, the government has a large amount of say about the future direction of the park and, to a lesser extent, its content. Much of the current discussion concerns the outlying facilities on the park, which Disney wants to brand with its corporate identity as much as possible. The government had envisaged designs that reflect local culture and architecture, such as tiled roofs. It had also planned walkways that emphasise the territory's history.
The discussions will probably end with qualified victory for Disney, which will be able to say, with a degree of justification, that the private sector has the best idea of what is required to bring the visitors in. It will be also concerned to avoid too much of a clash of ideas and will always point to the strength of the brand and its allure to consumers of all cultures. A concerted advertising spree around opening will probably silence the critics, both cultural and commercial. Given that the syndication attracted about HK$5.3 billion in commitments (but was not increased), the sponsors would be inclined to be bullish.
The Walt Disney deal should demonstrate whether the Asian consumer spending market is still buoyant, and whether the US brand can catch on quickly in Hong Kong after a previous foray into Europe sparked an initially frosty response. As the second park in the region after Tokyo Disneyland, the venture will consolidate the famous mouse's place in the consciousness of an increasingly prosperous market.
Disneyland Hong Kong is perhaps better described as a PPP deal since the project company is 57% owned by the Hong Kong government and 43% by the US media conglomerate. The government will cover more than 80% of the costs of the project, as well as a great deal of associated infrastructure work. Many local observers believe that Disney got an extremely good deal, suggesting that this is the result of a wish on the part of Hong Kong authorities to build a tourist hub that would put Singapore and Shanghai into the shade.
The park will be built on land on Lantau Island in the territory's Penny Bay, with a large proportion of the proposed site to be reclaimed from the sea. This work, which will be carried out by the Hollandsche Beton Groep, will be on the account of the government, part of the HK$14 billion in work that has to be done above the cost of actually building the park. A series of rail lines and a dedicated port will also appear on the site before it opens in 2005, and will again be the government's resposnibility.
A large part of the rationale behind the development of the park is the prospect of large numbers of low-end jobs in a city that is still very much the victim of its own success ? it cannot find enough low-end jobs to support a growing population. This is why it has welcomed Disney's HK$2.45 billion in equity and the promise of 35,000 jobs associated with the park if it reaches predicted visitor numbers.
Chase Manhattan Asia was mandated as lead arranger on the deal in August and has been able to speedily bring in six other banks as joint lead arranger and a further 24 at lower levels. It is proof, if any were needed, that Chase's dedicated team of leisure financiers has been able to adequately compensate for the recent loss of its retail operations in the region. And whilst the large sums of government money poured into the park mean that failure is very unlikely, a theme park, with its reliance on unsteady visitor numbers, is not the most iron-clad of credits.
The financing breaks down into a term loan of HK$2.3 billion and a revolving credit of HK$1 billion. Both tranches carry a tenor of 15 years and an average life of 10.9 years. The margin on the loans is 100bp over the Hong Kong Interbank Offered Rate (HIBOR) for the first five years, 125bp for years six to 10, and 137.5bp for the final five years, reflecting the strong support of the two sponsors.
The six banks joining Chase for a take of HK$130 million and lead arranger title were BNP Paribas, BOCI Capital, Crédit Agricole Indosuez, Fuji Bank, HSBC Investment Bank and Standard Chartered. Arrangers, for HK$105 million, were Abbey National Treasury Services plc, Agricultural Bank of China (Hong Kong), Banca Nazionale del Lavoro SpA (Hong Kong), Bank of Communications (Hong Kong), Bank of East Asia, Bayerische Landesbank (Hong Kong), Chekiang First Bank, China Construction Bank (Hong Kong), DG Bank (Hong Kong), Hang Seng Bank, Industrial & Commercial Bank (Asia), Keppel TatLee Bank (Hong Kong), Overseas Union Bank (Hong Kong), Shanghai Commercial Bank, Tokyo-Mitsubishi International (HK), Wing Hing Bank and Wing Lung Bank.
Three banks took co-arranger titles ? Asia Commercial Bank, Bank Austria Creditanstalt International AG (Hong Kong) and Sanwa Bank ? for commitments of HK$85 million apiece.
And lead managers comprise Dah Sing Bank and International Bank of Asia, contributing HK$70m each, and Citic Ka Wah Bank and Liu Chong Hing Bank, both lending HK$62.5 million.
It is just over a year since the initial agreement was signed and a certain amount of work has already been carried out on the site. Indeed, the project has already aroused small pockets of opposition in the territory, in particular from local fishermen and environmental campaigners who feel that an insufficient level of due diligence has been carried out to determine future toxic liability. London's Millenium Dome, for instance was forced to undertake an extensive clean-up operation, with all of its associated costs, on cheap, but contaminated land.
Even more intractable is the question of the park's identity. As a major shareholder, the government has a large amount of say about the future direction of the park and, to a lesser extent, its content. Much of the current discussion concerns the outlying facilities on the park, which Disney wants to brand with its corporate identity as much as possible. The government had envisaged designs that reflect local culture and architecture, such as tiled roofs. It had also planned walkways that emphasise the territory's history.
The discussions will probably end with qualified victory for Disney, which will be able to say, with a degree of justification, that the private sector has the best idea of what is required to bring the visitors in. It will be also concerned to avoid too much of a clash of ideas and will always point to the strength of the brand and its allure to consumers of all cultures. A concerted advertising spree around opening will probably silence the critics, both cultural and commercial. Given that the syndication attracted about HK$5.3 billion in commitments (but was not increased), the sponsors would be inclined to be bullish.
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