Bankers leading what would be a record $22.5 billion syndicated loan for Italy's Olivetti SpA expressed confidence Monday that the deal would be fully financed by Friday.
As many as 200 banks across the world could hold a piece of the loan, which Olivetti would use to help pay for its proposed $57.3 billion hostile takeover of Telecom Italia SpA, a former state-run mobile phone company.
A $12.5 billion bond issue, denominated in euros, would also be launched if the takeover bid is successful.
As of late Monday, a member of the bank group leading the loan said it had commitments totaling $13 billion, including an initial $10 billion pledged by co-leads Chase Manhattan Corp., Donaldson Lufkin & Jenrette, Lehman Brothers, and Italy's Mediobanca. Three unnamed banks have committed $1 billion each.
"We feel pretty good," the banker said. "There's a lot of confidence the financing will be completed."
Each member of the lead group has pledged $3 billion, except Mediobanca, which has committed $1 billion. Those commitments are likely to be reduced through a second syndication should the deal close.
Lenders finished a series of meetings Friday with potential investors throughout Europe, but one-on-one meetings are expected to continue through this Friday, a bank group member said.
To be sure, there are several obstacles that could derail Olivetti's bid. Two loom large: Italian courts could block the buyout, and shareholders could nix the plan.
But the biggest hurdle-financing-looks close to being cleared, increasing the likelihood of the bid's success.
"You need a fully funded bid. If the financing isn't in place, the deal is off," said a banker involved in the financing. "It's that simple."
Though $9.5 billion must be raised in just four days, some potential U.S. investors contacted for this story said they are leaning toward a commitment. The loan carries a short maturity schedule and highly leveraged pricing-even though Olivetti is rated investment grade.
"It's getting a lot of thought here," said a banker at a leading lender.
To sweeten the loan, the lead group is dangling a minimum payment of $5 million for a $1 billion commitment-even if the deal fails. And several key New York-based investors, including Goldman Sachs & Co., have sent representatives to London to meet with the lead managers causing a flurry of meetings on deadline.
"The deal itself is coming out of Milan"-where Olivetti is based-"but there's a lot of activity here," said a bank group source in London.
Meanwhile, a bank group led by J.P. Morgan & Co., Credit Suisse First Boston and Lazard Brothers is soliciting commitments for a $19 billion syndicated loan that would be used to fend off the Olivetti tender offer for Telecom Italia shares.
To ease resistance, bankers on both sides are not requiring exclusivity contracts which would keep banks from committing to both loans. Should both loans get commitments, it will be up to Telecom Italia's shareholders to pick a winner when they consider Olivetti's bid in mid-April.
In the meantime, the execution of the Olivetti financing is being closely watched, not only for what banker called the "sheer size of the deal" but because American deal-making prowess in the European market is getting a unprecedented test.
Said one banker aiding the Olivetti bid, "The stakes here are just incredible. This is a huge push for us."
