NationsBank, Swiss Bank Lead $12B of Loans For Utility Deal

NationsBank Corp. and Swiss Bank Corp. are putting together about $12 billion in loans that would enable Atlanta-based Southern Co. to bid for National Power PLC, market sources said.

The loan could give some momentum to a proposal that seemed to be foundering just days ago. Last Wednesday, Southern disclosed its interest in buying Britain's largest power generator but was promptly rebuffed by National Power's chairman, John Baker.

Swiss Bank is arranging a loan worth nearly $10 billion in London, while NationsBank, in conjunction with several other banks, is putting together a $2 billion facility in the United States, market sources said.

The bank loans are vital for a bona fide offer from Southern both because merger proposals in England require up-front financing and because National Power has indicated reluctance to consider any kind of offer without clear financial backing.

"National Power has identified three key issues they want to resolve before they welcome discussions," said Matthew Siebert, a utilities analyst at ABN Amro Hoare Govett in London.

First, Southern must offer a credible price, Mr. Siebert said; second, the offer must be backed up by credible financing; and third, Southern's strategy must be coherent and offer the combined business a viable future.

Bank lenders said Swiss Bank is the logical choice to lead such a huge deal because it led last year's roughly $1 billion deal for Southern to buy South Western Electricity, a regional power distributor in London.

NationsBank, as a big corporate lender in the southeastern United States, also was well-positioned to take a leading role.

Other banks that have lent to Southern include Chemical Banking Corp. (now Chase Manhattan), Toronto Dominion, National Westminster Bank, and Industrial Bank of Japan, which all had prominent positions in the earlier Swiss Bank term loan.

The $1 billion term loan was refinanced by J.P. Morgan & Co.

Utilities analysts cautioned that resistance by National Power is one of a host of political and regulatory obstacles that could impede a foreign- based company from acquiring Britain's largest power generator.

The Mergers and Monopolies Commission in Britain has yet to give an opinion on Midlands' proposed acquisition of Powergen, a case that would have a direct bearing on the potential Southern-National Power combination because it also weds power sources with distributors.

The Economist has reported that the commission has reservations about the Midlands-Powergen deal but would allow it as serving the national interest.

The Southern deal could encounter greater resistance.

"There's already been some concern about an American company coming in to buy the largest utility company in the United Kingdom," said a utilities analyst. "It's quite a sensitive time politically, with widespread local elections" coming in the next few weeks.

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