In 1999, Hong Kong experienced the financial crisis. Followed in 2003, it was hit again by SARS and the deterioration of its economy. The Hong Kong Special Administrative Region (HKSAR) government needed an invigorating project to revive economic confidence. On November 2, 1999, the two parties, The Walt Disney Company (WDC) and the HKSAR Government, signed an agreement for joint investment and construction of the Hong Kong Disneyland (HKDL) project (Hong Kong Disneyland, 2017). As a major destination for family travel, HKDL has continuously brought substantial economic benefits to Hong Kong. Say no to plagiarism. Get a tailor-made essay on "Why violent video games should not be banned"?Get an original essay According to the survey data of the Hong Kong Tourism Board and the operation of the HKDL, the additional consumption of visitors to the park in the 2015 financial year (FY2015) was HK$18.8 billion (Hong Kong Tourism Board, 2018; Hong Kong Disneyland, 2017). Taking into account the direct and indirect value added of park visitors in excess spending in Hong Kong, HKDL contributed a total of approximately HK$9.3 billion in value added to the Hong Kong economy over of fiscal year 2015, equivalent to 0.42% of GDP, and created 20,900 jobs. (Hong Kong Disneyland, 2017). During the first 10 years of the park's operation, a total value added of HK$74.4 billion to Hong Kong's economy was achieved, equivalent to 0.38% of gross domestic product. During the same period, a total of 195,500 jobs were created, creating numerous employment opportunities for frontline workers and the tourism industry in Hong Kong (Hong Kong Tourism Commission, 2016). Investment In order to gain access to Disneyland in Hong Kong, the HKSAR government agreed to the tough conditions of the WDC, including that the HKSAR be a major fund investor who must be responsible for the construction. According to the cooperation agreement, the HKSAR government will join hands with WDC to establish a company named Hong Kong International Theme Park Ltd (HKITP), and build a world-class international theme park and resort hotel near Hong Kong International Airport at Penny Bay on Lantau Island (Hong Kong Disneyland, 2017). HKDL's total investment amounted to 14.1 billion Hong Kong dollars (HKD), using the use of loans and capital injection as hybrid financing arrangements. Among them, WDC invested HK$2.45 billion, holding 43% stake in the theme park company; and the HKSAR government invested HK$3.25 billion, or 57% of the shares (Hong Kong Legislative Council, 2005). Additionally, of the HKD$8.4 billion in loans, HKD$2.3 billion came from bank commercial loans. In mid-2008, WDC repaid the loans owed for Hong Kong Disneyland. Moreover, the remaining loans of HKD$6.1 billion were repayable within 25 years of opening (Hong Kong Legislative Council, 2005). Financing Creating HKDL is extremely expensive. To carry out this project, the HKSAR government and WDC have made considerable efforts to develop commercial elements such as equity, financing, land and logistics infrastructure (Hong Kong Legislative Council, 2005). Ownership Structure Hong Kong International Theme Parks Limited (HKITP), a joint venture between the HKSAR Government and WDC, is responsible for the construction and operation of the HKDL theme park. Both parties agree that if third party investorsare interested in HKITP in the future, the HKSAR government and WDC may sell their shares. However, WDC owns a minimum of $1.9 billion in HKD shares, while the HKSAR government is not subject to minimum shareholding requirements after the opening of the theme park (Henderson, 2008) . Construction Expenses The construction cost of the HKDL theme park is estimated at HK$14.1 billion. In addition to the capital of HKD$5.7 billion, an additional loan of HKD$8.4 billion is required to achieve the optimal capital structure of "Liabilities/Net Assets" 6:4. Debts of 8.4 billion included a total of $6.1 billion in government loans, a 25-year interest repayment and a commercial loan of HKD$2.3 billion (Economic Analysis and Business Facilitation Unit, Bureau of Hong Kong Financial Secretary, 2017). Land cost The HKDL theme park covers an area of ​​126 hectares, costing HK$40 billion in terms of land development, including reclamation and grading. of the land (Hong Kong Disneyland, 2017). According to revenue projections, HKITP cannot pay the fees in cash. From the perspective of investors, the expected rate of return on equity will be significantly reduced and a reasonable return will not be achieved. not achieved, which will prevent HKITP from raising funds on a commercial basis (Legislative Council of Hong Kong, 2005). both shareholders agreed that the HKSAR government should inject HK$4 billion from HKITP as capital attached to the land for Phase I of the theme park. The capitalization of the subsidiary may be converted into ordinary shares of the company when the performance of HKITP is satisfactory, but. conversion can only begin after five years of HKDL activation. In order not to excessively affect the value of the shares of other shareholders, the conversion ceiling will increase by 5% each year. The maximum conversion amount shall not exceed 10%, that is, if the conversion of all shares of the subsidiary is carried out at least 25 years after the opening of the HKDL theme park (Hong Kong Legislative Council, 2005). According to the agreement, the title of the theme park Phase I is 50 years and HKITP has 50 years of renewal rights. In addition, HKITP reserves the right to purchase Phase II land for HK$2.8 billion (1999 land price, adjusted for inflation). The option is valid for 20 years (Hong Kong Legislative Council, 2005). Logistics infrastructure To support the construction of the HKDL theme park, the HKSAR government has also invested HK$13.6 billion in infrastructure projects around the theme park, including surrounding roads, piers, public transportation , police stations, fire stations, drainage and sewerage facilities and land leveling. . The expenditure is substantial and the HKSAR government has stated that since this land has long been planned for tourism and recreational purposes, most infrastructure projects must be undertaken even without a theme park. The profound economic and social influences and benefits to Hong Kong of the construction of the HKDL theme park are difficult to quantify. With a total investment of around HK$30 billion under the private sector capital operation, the project will be out of reach for the rest of the years (Hong Kong Legislative Council, 2005). In order to achieve commercialization, the HKSAR government has worked hard on designing the transaction structure. First, only construction costs are listed asproject spending to ensure that project returns are higher than those of general infrastructure projects such as airport or railway investments. Second, the debt ratio determines the amount of equity investment, and the government provides low-interest loans to avoid the dilemma of excessive financial spending. Finally, the “maturity and equity swap” agreement is suitable to share project maturity benefits and exit in a timely manner. On the other hand, WDC holds a 43% stake in a total investment of approximately HKD$30 billion for a single consideration of HKD$2.45 billion, excluding fees charged by the HKITP (Hong Kong Legislative Council, 2005). The strength of the WDC in the business structure is evident. Long-term analysis (1) Past operations (year 2016) Figure 1. Annual business review of Hong Kong Disneyland for fiscal year 2016 (Hong Kong Disneyland, 2017) HKDL's revenue mainly comes from the sale of admission tickets to theme parks. , sale of goods and catering services in parks and hotels, as well as rental of hotel accommodation. In FY2016, HKDL's total revenue was HKD$4.75 billion, a decrease of 7%, HKD$364 million less than in the fiscal year. previous, reflecting the decline in park visitors and the impact of the number of weeks on the fiscal year. Excluding the impact of the number of weeks in the financial year, revenue decreased by 5% (Hong Kong Disneyland, 2017). HKDL's operating costs and expenses mainly include salaries, operating expenses, sales expenses and marketing expenses. Operating costs and expenses for the 2016 financial year were HK$4,035 million, a decrease of 6% or HK$274 million from the previous financial year, mainly due to efficiency measures and cost management and cost savings, as well as favorable factors affecting the number of weeks of the financial year. Depreciation and amortization for the current financial year was HKD$890 million, a decrease of 7%, or HKD$66 million, from the previous financial year. This is mainly because some assets with a useful life of 10 years have been fully depreciated in the current financial year (Hong Kong Disneyland, 2017). Non-current assets mainly include property, plant and equipment, rental land and construction projects. At the end of the financial year, non-current assets amounted to HKD$18,788 million, an increase of 12% or HKD$2,081 million from the previous financial year. Current assets include cash and cash equivalents, accounts receivable and other receivables, and inventory. Current assets increased from HK$1,556 million to $1,869 million in FY 2016 (Hong Kong Disneyland, 2017). The financial debt includes the payment of the sum as well as other debts and income recognized in advance. The current financial liability at the end of this financial year 2016 stands at HKD$1,951 million, an increase of 9% or HKD$169 million from the previous financial year. Non-current liabilities include long-term borrowings and pension commitments. The balance mainly consists of long-term unsecured loans provided to HKDL by the HKSAR government and the WDC. The loans will be repaid in installments until FY 2025. Non-current liabilities at the end of FY 2016 were HK$1,983 million, an increase of 49% or HKD$656 million per year. relation to.