J.P Morgan and Chemical Banking Corp. wasted no time coming to market with their $7.5 billion loan to Westinghouse Electric Co. for its acquistion of CBS.
One day after the purchase was announced, the lead banks started seeking commitments from other banks to underwrite one of the largest leveraged finance deals since the heyday of LBOs in the late 1980s.
A dearth of blockbuster deals in noninvestment-grade credits has given Westinghouse a chance for cheaper pricing. "The market for this type of transaction is very attractive right now," said Fred Reynolds, the chief financial officer at Westinghouse.
Bankers say they are eager to finance the deal at relatively cheap levels, because they still secure better fees than they would from an investment-grade transaction.
"Right now, we are finding everybody across the board is pretty asset hungry," said a banker. "If you're going to be distributing a large loan, now is an excellent time."
Industry experts dismissed the notion that Westinghouse and its banks are rushing to enlist banks before Walt Disney & Co. seeks financing for its $19 billion acquisition of Capital Cities/ABC Inc.
The investment-grade Disney company will attract a different group of bank lenders, bankers said, and may ultimately be smaller than the Westinghouse deal if Disney pays for its transactions through other means.
"I don't think we'll be going to the same market as the Disney deal," said Mr. Reynolds. "We'll be using largely bank financing because we believe cash flows and asset divestitures will be quick, whereas I'm sure Disney is looking to the bond market and commercial paper."
Mr. Reynolds said he was pleased with his lead banks, and cited Chemical's James B. Lee Jr. for his long-term help in putting various deals together.
Morgan has served as Westinghouse's adviser on the CBS acquisition.
The loan will cover the cost of the acquisition, and will help refinance a $2 billion loan to Westinghouse, and a $500 million loan to CBS.
Each bank underwrote $1 billion of the loan.
Market sources said the loan will be open to approximately 40 banks, most from Westinghouse's current bank group.
The lead banks are looking for 35 managing agents for underwriting commitments of $400 million each by Aug. 24.
Managing agents are expected to receive a flat fee of $1 million, plus a fee of 137.5 basis points on allocated commitments. The banks are looking for several different tiers of commitments by Aug. 31.
The loan is divided into three equal parts: a two-and-a-half year term loan, a seven-year revolving credit, and a seven-year term loan, sources said.
The loan is priced on a sliding scale based on the borrower's credit rating. The initial spread is 150 to 175 basis points over the London interbank offered rate.
The banks are expected to hold a general bank meeting on Aug. 10.
In another media consolidation deal, Chase Manhattan Corp. is coming to market this week with a $440 million loan for the sale of Patrick Media Group by GE Capital Corp.
The buyer is a group formed by Hellman & Friedman Capital Partners, San Francisco and Eller Media Co. which has operations in Atlanta, El Paso, and Phoenix.
GE acquired Patrick Media in a 1986 leveraged buyout that went sour. New management hired in 1991 turned the company around, increasing annual revenues to $220 million from $170 million, cash flow from $37 million to $65 million and profit margins to about 30% from 20%.
A banking source said the deal includes the $440 million syndicated bank loan and $190 million of equity. Pricing will be typical of a leveraged financing, at 275 basis points over the Libor.
Stephen Kleege contributed to this story.
