In sweetening its bid for Paramount Communications Inc. to roughly $10 billion in cash and stock. Viacom Inc. likely will have to offer its banks a better deal, too.
The revised bid, if successful, means Viacom would emerge as a more leveraged company, assuming that the increased cash portion is financed in part with additional debt.
As a result, the original pricing of the bank loans probably would be raised to reflect the increased leverage, banking sources said.
The all-in spread on the bank financing was initially set at 62.5 basis points over the London interbank offered rate, a banker said.
On Monday, Viacom raised the cash portion of its friendly offer to about $4.8 billion from $1.1 billion.
Viacom said Monday that its $80-a-share cash tender offer for 51% of Paramount's stock was subject to financing.
Viacom has already raised $1.8 billion of the additional amount needed to finance the deal from equity investors. As reported, Viacom initially raised $1.5 billion in bank financing.
The remaining $1.5 billion hole is expected to be filled with additional bank loans, the issuance of notes, or a combination of the two.
The company's initial $1.5 billion bank deal attracted commitments of nearly $5 billion in the loan market, so there appears to be plenty of capacity to support the higher offer.
Meeting with Banks Set
Viacom officials were scheduled to meet with the company's bank group Monday to discuss the capital structure of the revised Paramount bid.
The Viacom bank group is led by Bank of New York, Citicorp, and Morgan Guaranty Trust Co.
In sweetening its bid, Viacom essentially matched a rival offer from QVC Network. As of press time on Monday, QVC had not responded to Viacom's new bid.