International Business Machines Corp.'s decision to sweeten the up-front fee on its $10 billion credit line is likely to reverberate in the loan market for weeks, or even months.
The fee increase was seen as an acknowledgment that IBM and its lead bank, Chemical Bank, had mispriced the deal.
At least one bank is already using the IBM episode as a marketing tool, telling clients that Chemical's read of the loan market is faulty.
Beyond that, some bankers saw the fee increase as evidence that the steady erosion in loan pricing this year had finally hit a wall of resistance in the market.
At the same time, though, the $10 billion credit line was fully underwritten by some 18 banks before IBM raised the up-front fees late last week, so the message from the loan market remains somewhat mixed.
As of Monday, some confusion remained about the exact level of underwriting commitments IBM and Chemical had raised at the coagent level. The deadline for commitments by prospective coagents passed last week.
Conflicting Figures
At a bank meeting last Thursday, IBM said it raised more than $11 billion in commitments, including Chemical's commitment of $1.15 billion.
But one source offered a tally showing $10 billion of commitments from 18 banks, including Chemical.
An IBM spokeswoman had no immediate comment on the discrepancy.
IBM doubled the up-front fee that it was initially offering. Banks that commit $100 million, for example, will now get a fee of 14 basis points, based on final allocation, up from 7 basis points. Banks must commit themselves by Nov. 24 to get the higher fee.
In raising the fee, IBM said, it wanted to insure a quick syndication of the credit.
