4 Banks Picked for Universal Deal; Westinghouse Loan Oversubscribed

J.P. Morgan & Co., NationsBank Corp., Natwest Markets, and the Bank of Nova Scotia have jointly won the mandate to lead a $1.5 billion loan for the expansion of Universal Studios in Orlando.

Meanwhile, bankers said the $7.5 billion loan to Westinghouse Electric Co., for the acquisition of CBS, is oversubscribed less than a week after the bank meeting, with more than $8.3 billion of commitments from an international group of banks.

The owners of Universal, London-based Rank Organisation, PLC and MCA Inc., a subsidiary of the Seagram Co. Ltd., say they plan to use $1.2 million of the new loan to help quadruple the size of the theme park. The other $300 million will refinance debt on the studio.

Once enlarged, the attraction will be known as Universal City Florida.

A loan on expansion of accommodation and entertainment offerings appears to be a good bet, said Kelley Slay, a senior vice president at PKF Consulting's Miami office. He added that Orlando remains a strong resort market, and compared Universal's strategy to develop hotel rooms on the park site to Walt Disney Co.'s successful development strategy at its nearby theme park.

Hotel demand outstripped supply even during the 1980s in Orlando. Mr. Slay said. Although room rates and occupancy dipped slightly in 1994 after the addition of 5,000 new rooms in the Disney complex, the upward trend has resumed this year, he said.

The loan for Universal is structured as a 12-year project financing. As such, the borrower is Universal itself, rather than MCA or the Rank Organisation. The corporations benefit from this structure because the debt does not go on their balance sheets.

Universal will have to pay higher fees for project finance than for a corporate loan, said bankers, because there is more risk associated with funding a single project than with backing a diversified holding corporation.

Both companies, however, will support the loan with $600 million guarantees each up to the date of completion of the project, expected to be in the summer of 1999. The $300 million refinancing will be supported by the cash flow of Universal Studios Florida.

Following construction, interest and repayment of principal on the entire $1.5 billion loan will be serviced by the cash flow of Universal City Florida. Bankers said they expected the loan to be taken out by a long-term bond well before the loan matures.

The deal was fully underwritten by the four lead banks, with each bank taking $375 million. Morgan is acting as the lead bank in the four-handed deal.

The bank group will tap relationship banks to fill out the syndicate first, and then will go to project finance teams.

Japanese banks in particular are expected to give this deal a good reception.

The loan is expected to close in mid-October.

Separately, the $7.5 billion J.P. Morgan- and Chemical-led Westinghouse deal - the largest leveraged loan since the late 1980s - was fully subscribed well before the Aug. 24 date for senior agent commitments.

In addition to reported commitments from Toronto-Dominion, Mitsubishi Bank, and PNC Bank Corp., the lead banks have received commitments from Bank of New York, NationsBank Corp., First Chicago Corp., Fuji Bank, Mitsubishi Trust, Mellon Bank, Bank of Nova Scotia, Society Bank, Sumitomo Bank, Bank of Montreal, the Industrial Bank of Japan, and an unnamed bank.

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