In 1999, Hong Kong experienced a financial crisis. Later in 2003 it was hit again by SARS and the deterioration of its economy. The Hong Kong Special Administrative Region (HKSAR) government needed a reinvigorating blueprint to boost economic confidence. On November 2, 1999, the two parties of The Walt Disney Company (WDC) and the government of HKSAR signed a joint investment and construction agreement of the Hong Kong Disneyland (HKDL) project (Hong Kong Disneyland, 2017). As a major family travel destination, HKDL has continuously brought substantial economic benefits to Hong Kong. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original Essay According to survey data from the Hong Kong Tourism Board and the operation of the HKDL, the additional consumption of park visitors in the financial year 2015 (FY2015) amounted to HKD18.8 billion (Hong Kong Tourism Board, 2018; Hong Kong Disneyland, 2017). Taking into account the direct and indirect value added of overspending park visitors in Hong Kong, HKDL contributed a total of approximately HKD$9.3 billion in value added to the Hong Kong economy in fiscal 2015, equal to 0.42% of GDP and created 20,900 jobs (Disneyland Hong Kong, 2017). In the first 10 years of the park's operation, HKD$74.4 billion in value was added to the Hong Kong economy, equivalent to 0.38% of gross domestic product. A total of 195,500 jobs were created in the same period, creating numerous employment opportunities for frontline workers and the tourism industry in Hong Kong (Hong Kong Tourism Commission, 2016). Investment To gain access to Disneyland in Hong Kong, the HKSAR government accepted the harsh conditions of the WDC, including that of the HKSAR as the main fund investor to be responsible for the construction. Under the cooperation agreement, the HKSAR government will partner with the WDC to establish a company called Hong Kong International Theme Park Ltd (HKITP) and build a world-class international theme park and resort hotel at the nearby Hong Kong International Airport at Penny Bay on Lantau Island (Disneyland Hong Kong, 2017). HKDL's total investment was 14.1 billion Hong Kong dollars (HKD), applying the use of loans and capital injections as hybrid financing arrangements. Among them, WDC invested HKD$2.45 billion, holding 43% stake in the theme park company; and the HKSAR government invested HKD3.25 billion, representing 57% of the shares (Hong Kong Legislative Council, 2005). Furthermore, of the HKD$8.4 billion in loans, HKD$2.3 billion came from bank commercial loans. In mid-2008, WDC paid off loans owed for Hong Kong Disneyland. Furthermore, the other HKD$6.1 billion in loans were repayable within 25 years of opening (Hong Kong Legislative Council, 2005). Financing The creation of the HKDL is extremely expensive. To successfully complete this project, the HKSAR government and the WDC have made painstaking efforts in developing business elements such as equity capital, 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 the WDC, is responsible for the construction and operation of the HKDL theme park. Both sides agree that if third-party investors are interested in HKITP in the future, the HKSAR Government and the WDC could sell their shares.However, the WDC owns a minimum of $1.9 billion in HKD shares, while the HKSAR government is not subject to minimum shareholding requirements after the theme park opens (Henderson, 2008). Construction Expenses The construction cost of the HKDL theme park is estimated at HKD$14.1 billion. In addition to the capital of HKD$5.7 billion, an additional borrowing of HKD$8.4 billion is required to achieve the optimal capital structure of "Liabilities/Equity" 6:4. The debts of 8, US$4 billion included a total of HKD$6.1 billion in government loans, an interest repayment over 25 years, and a commercial loan of HKD$2.3 billion (Economic Analysis and Business Facilitation Unit, Hong Kong Financial Secretary's Office Kong, 2017 ). The Land Cost HKDL theme park covers an area of ​​126 hectares, costing HKD$40 billion to develop the land, including land reclamation and leveling (Hong Kong Disneyland, 2017). According to revenue projections, HKITP cannot pay taxes in cash, otherwise From the perspective of investors, the expected rate of return on capital will be significantly reduced and the reasonable return will not be achieved, resulting in HKITP will not be able to raise funds on a commercial basis (Hong Kong Legislative Council, 2005). Both shareholders agreed that the HK government should inject HK$4 billion from HKITP as land-attached capital for Phase I of the theme park. The capitalization of the subsidiary can be converted into ordinary shares of the company when the performance of the HKITP is satisfactory. The conversion can only begin after the activation of the HKDL for five years. To avoid excessively impacting the value of other shareholders' shares, the conversion cap will increase by 5% each year. The maximum conversion amount should not exceed 10%, that is, if the conversion of all shares of the subsidiary is completed at least 25 years after the opening of the HKDL theme park (Legislative Council of Hong Kong, 2005). According to the agreement, the title deed for Phase I of the theme park is for 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 HK government also invested HKD 13.6 billion in infrastructure projects around the theme park, including surrounding roads, piers, public transport, police posts, stations fire brigade, drainage and sewerage structures and land leveling. . The expense is substantial, and the HKSAR government has said that because the land has long been planned for tourism and recreational purposes, most infrastructure projects will have to be undertaken even without a theme park. The profound economic and social influences and benefits that the construction of the HKDL theme park will bring to Hong Kong 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). To achieve commercialization, the HK government has worked hard on designing the transaction structure. First, only construction costs are listed as project expenses to ensure that project returns are higher than those of general infrastructure projects such as investments in airports orrailways. Second, the debt-to-GDP 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 tailored to share the project's maturity benefits and exit timely. On the other hand, WDC has a 43% interest in a total investment of approximately HKD$30 billion exclusively for a consideration of HKD$2.45 billion, excluding fees charged by HKITP (Hong Kong Legislative Council, 2005) . The strength of the WDC in the commercial 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 entrance tickets to theme parks, sales of goods, food services in parks and hotels and rental of hotel accommodation. In financial year 2016, HKDL's total revenue was HKD4.75 billion, decreasing by 7%, or HKD$364 million less than the previous fiscal year, reflecting the decline in the number of visitors to the park and the impact of the number of weeks in the financial year. Excluding the impact of the number of weeks in the financial year, income fell by 5% (Hong Kong Disneyland, 2017). HKDL's operating costs and expenses mainly include salaries, operating expenses, sales costs and marketing costs. Operating costs and expenses for the 2016 financial year amounted to HK$4,035 million, a decrease of 6% or HK$274 million compared to the previous fiscal year, primarily due to measures of efficiency and cost management and cost savings, as well as favorable factors influencing the number of weeks of the financial year. Depreciation for the current financial year was HK$890 million, 7% or HKD$66 million lower than the previous financial year. This is mainly due to the fact that some of the assets with a useful life of 10 years have been fully depreciated in the current financial year (Hong Kong Disneyland, 2017). Non-current assets primarily include property, machinery and equipment, leased land and construction projects. At the end of the fiscal year, non-current assets amounted to HKD$18,788 million, an increase of 12% or HKD$2,081 million compared to the previous fiscal year. Current assets include cash and cash equivalents, accounts receivable and other accounts receivable, and inventories. Current assets increased from HKD$1,556 million to $1,869 million in fiscal 2016 (Hong Kong Disneyland, 2017). The financial liability includes the payment of the sum and other debts and deferred income. 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 compared to the previous financial year. Non-current liabilities include long-term loans and pension plan liabilities. The balance consists mainly of long-term unsecured loans provided by the HKSAR Government and the WDC to HKDL. The loans will be repaid in installments through fiscal 2025. Non-current liabilities at the end of financial year 2016 amounted to HKD$1,983 million, an increase of 49% or HKD$656 million compared to the previous financial year of 2015 (Hong Kong Disneyland, 2017). (2)Future Operation (2018 to 2023) On 22 November 2017, the HKSAR Government announced that it had reached an agreement in principle with the HKDL expansion and development plan..