Citibank is scrambling to protect its position as Viacom Inc.'s lead bank, following the company's weekend agreement to buy Paramount Communications Inc. for $8.2 billion in cash and, stock.
It is unclear how Viacom will finance the roughly $1.1 billion cash portion, but a number of major banks have already called the company with offers to help.
Viacom officials could not be reached for comment.
Fierce Competition Seen
"They'll be a lot of the big boys chomping at the bit on this one," said a senior official at one of Viacom's relationship banks.
"You can be sure we will be all over it," said a Citibank source, who also predicted that competition to lead any new Viacom credit would be fierce.
There was speculation that Viacom would ask the banks for a bridge loan to cover the cash portion and then refinance in the public debt markets after the acquisition is completed.
Bankers and analysts also said Viacom could repay the bridge loan with the roughly $1 billion of cash that is sitting on Paramount's balance sheet.
Refinancing Foreseen
It is also expected that Viacom will refinance its existing bank debt once the proposed merger is completed.
On Monday, the major credit rating agencies placed Viacom's debt ratings under review for possible upgrade.
A rating increase would put Viacom in a strong position to refinance its existing bank debt on more favorable terms either in the loan market or in the public debt markets.
Viacom does not have any rated senior debt, but the implied senior rating by Standard & Poor's Corp. is BBB-minus, which is the lowest level of the investment-grade ratings.
Previous Efforts
Citibank was agent bank for the original buyout loan that helped finance the $3.4 billion acquisition of Viacom in 1987 by Sumner Redstone, who remains chairman and controlling shareholder of the cable television company.
Mr. Redstone will remain chairman of the new company, to be called Paramount Viacom International Inc.
Last year, Citibank again led a $1.9 billion refinancing for Viacom, with Bank of New York as coagent.
Other Viacom banks include Bank of America, Bank of Boston, Chase Manhattan Bank, Chemical Bank, NationsBank, and Toronto-Dominion Bank.
The pricing under last year's $1.9 billion refinancing is said to range from 50 to 100 basis points over the London interbank offered rate, depending on Viacom's credit rating.
