Despite Tough Sell, 4 Banks Set to Close Scaled-Back $1 Billion

Bank of New York Corp., NationsBank Corp., Toronto-Dominion, and Long- Term Credit Bank of Japan are expected today to close documentation on a loan for TCI Communications.

The loan, initially structured as a $1.5 billion commercial paper backstop, was reduced to $1 billion in the face of low bank demand for the relatively thinly priced loan.

Market sources said the syndication was a tough sell, even for many of the company's strongest relationship banks. The reasons: TCI's third- quarter earnings came in lower than expected, and the company already had arranged more than $5 billion in bank loans for its subsidiaries.

"Bankers didn't feel compelled to pony up a huge amount on the heels of TCI West, another facility that the company did not long ago at thin pricing," said one of TCI's regular bankers.

Even given some of the challenges of syndicating the facility, bankers expressed some surprise that the deal for the nation's largest cable company was not fully sold in such a liquid market.

"For the most part, bankers have been lining up and saying, 'Thank you, sir, may I have another,'" said a syndicated lender. "To some extent, it is a little surprising, and it's probably long overdue."

To be sure, the company did procure approximately $1.3 billion from its bank group, market sources said.

A lender close to the transaction said John Malone, the well-known chairman of TCI, said during the syndication process that the company wanted to reduce its leverage.

"Once that announcement was made, the company made the decision to reduce the facility to $1 billion," said the banker.

A company spokeswoman said TCI had not yet completed its 1997 budgeting process when it entered the loan market. It voluntarily reduced the facility - $500 million of which was underwritten by the four lead banks - in the face of lower financial need, she said.

"We've had a very successful time over the past two and a half months when we've raised $3.5 billion," she said. "The banks continue to be very supportive."

Lenders said the company could have procured additional funds, even though they conceded that banks would have wound up holding closer to their commitment levels in a larger deal.

As it stands now, banks that committed $40 million will likely end up with close to $35 million, said a banker who participated in the transaction.

TCI has taken some strong actions in the past few months, including announcing a plan to cut staff in the fourth quarter by 2,500 employees, or 6.5% of its total work force.

Bankers said the competitive threat from satellite services provided an "overhang" on the cable lending market, which might have led some cable lenders to hesitate.

Indeed, those concerns could affect syndications for other cable companies as well.

"There will definitely be some questions asked on the competitive environment," said a lender, who said that a cable company that he was preparing to take to the bank market was anticipating many of those questions.

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