The Third Syndication Strategy

(Chase with Sole mandate; no sub-underwriting)

The third strategy for Chase, as the sole mandate, is to skip the step of sub underwriting and directly start general syndication. It was not shown to the Disney. It was the combination of the first two strategy. The final allocations would be: Chase at HK$300 mn 4 arrangers at HK$250 mn each 8 co-arrangers at HK$150 mn each 8 lead managers at HK$100 mn Relative to the other 2 strategies this strategy would: improve Chases compensation and league table status , but would expose it to the greatest amount of credit and syndication risk, and Would result in the largest syndicated as measured by the no. of participating banks.

Risk and Return Analysis

Compared to the other two strategies, the general syndication strategy increases return while adds risks to Chase. Generally, without subwriting, Chase retains more profitability from the deal; however, Chase also bears all the underwriting risk. This strategy involves 4 tiers, 21 banks, and the largest syndication structure compared to the other two strategies. This Strategy keeps the syndication size for Chase at HK$300 million, 9.1% of the total amount. Besides, inviting a larger number of banks could improve the competitiveness of the deal, resulting to better execution and pricing. However, more banks involved may lead to higher administration costs and coordination issues. In addition, Chase would hold less controlling power with more banks included in the deal. This sole mandated without subunderwriting strategy on one hand would improve the compensation for Chase. The total fees for Chase under the third strategy would reach HK$23.36 million, 69% and 166% higher than strategy 1 and strategy 2, respectively. However, the strategy may also significantly expose Chase to underwriting risk, as Chase is the only underwriter of the deal and would underwrite the whole amount, HK$3.3 billion. If the market would not buy the deal from Chase, Chase would face significant loss. Although this strategy generates the most compensation, the total fees earned only accounts 0.71% of the total exposure.