Walt Disney and Westinghouse have turned the spotlight on media lending this week, announcing broadcast network acquisitions that could add as much as $20 billion in loan demand to what already is one of the most active sectors for bank financing.
The deals are the latest in a wave of consolidations driven largely by regulatory changes. Analysts said the $19 billion Disney deal for Capital Cities/ABC Inc., in particular, will spur other deals, as specialized movie producers, cable companies, and telephone companies forge alliances in hopes of matching the conglomerates' ability to produce, format, and distribute entertainment products under one corporate roof.
"Disney is the standard against which other companies will be measured," said media analyst Jill S. Krutick of Smith Barney Inc..
Though some banks may choose to commit to both the Disney deal and Westinghouse Electric Co.'s announced $5 billion purchase of CBS Inc., bankers emphasized the differences between the two from a lender's perspective.
"The two deals appeal to different kinds of buyers," said a bank syndicator. "The Disney deal is a plain-vanilla corporate credit, while the other is a noninvestment grade structured credit."
"Bankers see the Disney opportunity as a chance to get a foot in the door," said another banker.
Joining the Disney loan might give a bank the inside track on capital markets activities, including underwriting bonds and providing derivatives products.
On the other hand, since the credit is not investment grade the Westinghouse deal presents banks with an opportunity to get higher upfront fees.
Bankers said that one way or another, bank syndicators with media lending operations would have to commit to at least one of these deals.
"Frankly, there's going to be scarcity factor because Disney just bought ABC and if Westinghouse completes its acquisition of CBS, that's going to be gone," said a banker. "All the attractive networks will be gobbled up by big companies."
Bank syndicators said that the investment grade Disney deal would probably be structured as a short-term financing, and would probably resemble a $10 billion deal put together last year for American Home Products Corp.'s purchase of American Cyanamid.
As an investment grade credit, the Disney loan is expected to have extremely thin pricing.
Neither deal is currently in the market. Chemical Banking Corp. and J.P. Morgan & Co. reportedly would lead a deal for Westinghouse. As the lead lender to Disney, Citicorp is presumed to be the front-runner on that loan.
Some bankers said that the big deals would lead to new financing opportunities in a few years, when the companies divest noncore holdings.
Ms. Krutick pointed out that Time Warner, which was created in a merger between Time Inc. and Warner Communications, has been "simplifying" its businesses lately by spinning off such units as the Six Flags amusement parks.
