AT&T Backup Credit Proves Irresistible

In a sign that banks want to reach out and find high-quality business, AT&T received about $12 billion to $13 billion in commitments for a new $8 billion backup credit line.

That is what bankers with knowledge of the transaction said on Wednesday as total commitments were being tallied. The deal is expected to close on Friday.

Despite lower interest rates and fees than for an existing $6 billion acquisition loan, American Telephone & Telegraph Co. and its sole agent, Chemical Banking Corp., received an enthusiastic response from both domestic and international banks. Up to $3 billion of the new proceeds could help finance AT&T's $7.5 billion acquisition of NCR Corp. if regulators decide to disallow a proposed all-stock transaction.

|Substantially Oversubscribed'

Richard Gray, a spokesman for AT&T, confirmed that the financing "was substantially over-subscribed" but did not specify the amount. He said more than 50 banks made commitments.

"It indicates their belief in AT&T's financial strength," said Mr. Gray.

Without confirming specific figures, James Lee, managing director at Chemical Bank, said "the response of the syndication confirms the capital markets' belief in the wisdom of AT&T's corporate strategy, including the acquisition of NCR."

The huge response also underscores the almost insatiable demand for top-quality borrowers, especially for backup lines that might not be drawn. And because many backup lines mature in less than one year, no capital has to be set aside, one lender pointed out.

At a time when banks are still struggling with higher-risk loans, bank executives are eager to do business with strong credits like Ma Bell.

AT&T has received the tremendous response despite more aggressive pricing than its $6 billion loan, which matures June 30. The new loan carries an interest rate of 25 basis points over the London interbank offered rate, compared with 37.5 over Libor for the expiring $6 billion facility.

Some banks are reportedly committing as much as $500 million, banking sources said. Other banks said to be participating in the deal include existing lenders such as Bankers Trust New York Corp., Morgan Guaranty Trust Co., and Manufacturers Hanover Corp., and a large group of foreign banks.

AT&T is arranging the $8 billion bank line to replace $7.5 billion in expiring loans. The new facility could help finance the $7.5 billion acquisition of NCR. if the transaction is not done through a pooling of interests.

The new loan will be scaled back to $5 billion if the pooling is allowed.

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