AT&T Raising $8 Billion Line As NCR Backup

AT&T Corp. is lining up $8 billion in backup credit in case regulators disallow its planned $7.4 billion stock swap for NCR, bankers familiar with the deal say.

The new borrowing facility, which replaces AT&T's current $7.5 billion in multiple commitments from banks, is the largest single credit line to be arranged since the 1980s.

If AT&T is forced to finance the transaction partially with cash, it is unclear whether the company would draw down the facility or use it to back an issue of commercial paper. All commercial paper programs require bank credit lines in case the borrower is unable to meet an obligation.

If the Securities and Exchange Commission permits the planned tax-free swap, AT&T is expected to reduce the facility to $5 billion, using the funds to provide working capital and for general corporate purposes.

Chemical Banking Corp. is sole agent on the new bank line, and some agents on the existing lines are expected to be named agents on the new facility. A Chemical spokeswoman declined comment.

If the stock swap isn't allowed, AT&T's borrowing unit said in its latest 10-Q filing with the Securities and Exchange Commission, "the merger will be converted to a cash election merger and would be accounted for as a purchase." If that occurs, AT&T would purchase 40% of NCR's shares with roughly $3 billion with cash and the remaining 60% with AT&T stock, at $110 per share.

Under the cash-stock package, depending on the stock price of AT&T, NCR holders will receive between 2.708 shares and 3.223 shares.

More than 50 banks have indicated they will participate in the underwriting syndicate. Many of them will roll over their existing exposure, banking sources say. The financing replaces two separate facilities, including $6 billion of which was raised for the acquisition, and a maturing $1.5 billion backup line.

Officials at the Morristown, N.J.-based communications giant did not return calls. In its regulatory filing, the company said "future financing will be arranged as deemed necessary to meet the company's capital or other requirements.

"The timing of issue, principal amount and form of such financing will be determined based upon the company's need, prevailing market conditions and general economics conditions."

Bankers said the financing is expected to close by July 1. Facility fees are 10 basis points. Pricing is expected to be 25 basis points over the London interbank offered rate. The loan will carry a maturity of 364 days.

Even if it funds the acquisition with cash, most credit rating analysts do not believe it will materially limit the company.

"The longer-term effect on the merger on AT&T's capacity to meet its debt obligations is likely to be about the same in either case," wrote Frank Plumley, an analyst at Standard & Poor's.

Both companies are rated double-A by Standard & Poor's Corp.

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