J.P. Morgan & Co., Chase Manhattan Corp., Toronto Dominion, and NationsBank Corp. have brought a tightly-priced $5.5 billion loan to market for Westinghouse Electric Co.
Pittsburgh-based Westinghouse will use the proceeds from the deal to refinance some of last year's $7.5 billion loan in connection with the acquisition of CBS Inc. and some of the debt of Infinity Broadcasting, a recent acquisition.
"This is a very aggressive deal for an aggressive company," said a banker who attended one of three bank meetings in New York on Wednesday.
Westinghouse paid much higher fees on last year's blockbuster loan, almost three times that of the current loan.
Additionally, the current, unsecured deal has no up-front fees, as compared with a percentage point plus 37.5 basis points and a $1 million flat fee from last year's deal.
The combination of a liquid marketplace and the strength of the banking relationships at both Westinghouse and Infinity should pull the deal through the market, said one banker who contributed to last year's deal.
"A lot of banks are willing to give companies like this the benefit of the doubt," he said. "When you look at what they've been able to accomplish over the last year, it's tough to believe that they're going to slow their momentum."
Westinghouse significantly reduced its leverage in the past year, selling off both its defense and furniture businesses, generating approximately $3.5 billion in cash.
One banker said that the sales came about a year ahead of schedule.
To be sure, some expressed displeasure at the considerably lower fees in the current deal.
"The company believes it already paid out fees to its bankers last year and doesn't have to this year," said another banker. "I say they still have to pay me" if they want the bank to participate in the deal, he said.
This banker said he expected the deal to encounter some resistance.
"As a credit gets stronger, the company starts to bully the banks and says that it now wants its deal unsecured," said a bank loan analyst. "The question becomes: Are there enough banks out there that are willing to cave?"
The analyst estimated losses on secured deals at around 8%. Losses on unsecured deals can be two or three times that much, he said.
"Everybody is aware that there are problems in consumer credit, but nobody is talking about commercial credit," said Lawrence R. Vitale, a bank analyst at Bear Stearns & Co.
"I see a lot of price competition on lending side, and I wonder if this isn't time we should be looking at commercial sector," Mr. Vitale said.
Nonetheless, bankers said the deal reflected the lower leverage and stronger debt position of Westinghouse.
Each of the four lead banks has underwritten $500 million of the deal, which is structured as a five-year revolving credit.
J.P. Morgan is acting as administrative agent, with Chase serving as documentation agent.
Syndication agents NationsBank and Toronto Dominion both contributed to last year's deal but did not receive agent credit.
"We are thrilled to be in a lead position," said Tom Bunn, the head of syndications at NationsBank. "This reflects Westinghouse's desire to broaden its lead bank group."
"The new transaction is reflective of Westinghouse's performance, focus and current market conditions," Mr. Bunn said.
The lead banks will be looking for managing agents commitments of $175 million.
The minimum commitment is $25 million.
Commitments are due by Aug. 23.
One-and-a-half billion dollars of the loan is available on completion of the acquisition of Infinity Broadcasting.
