Chase Manhattan Corp., Lehman Brothers, and Merrill Lynch & Co. are beginning the general syndication of a whopping $10.9 billion loan for Texas Utilities Co.

The loan would be used to finance the company's acquisition of England's Energy Group PLC. Chase and its co-arrangers have lined up 21 banks to underwrite the loan, and bank meetings are scheduled today in London and Wednesday in New York.

The deal represents a significant, if costly, victory for Chase and Texas Utilities on two fronts. Texas Utilities won with a bid 27% greater than the initial bid on Energy Group that was made 10 months ago. And Chase won a loan that banks, at the urging of rival financiers, had promised to shun.

Still, Chase seems to be sewing up the biggest loan this year, which is being divided between U.S. dollars and pounds sterling to make it palatable to international banks.

Chase, Lehman, and Merrill are underwriting equal parts of the total loan. But the 21 sub-underwriting banks have agreed to handle $300 million or $500 million parts. Sources close to the deal say the syndicate includes a substantial number of both European and domestic banks as well as three Japanese banks-a group recently absent from the U.S. corporate loan market.

The deal is coming in two parts. Half the loan is a one-year bridge. The other half is coming with staggered tranches out to five years. Chase, Merrill, and Lehman are pricing the loan at 125 basis points above Libor.

Depending on whom you ask, it would be either the largest leveraged loan in three years or the largest loan in dollar terms in 15 months.

Loan Pricing Corp. considers any loan at that pricing to be leveraged; Securities Data Co. puts the benchmark for leveraged loans a tad higher, at 150 basis points above Libor.

By Loan Pricing's standard, the Texas Utilities loan would eclipse the $7.5 billion leveraged loan for Westinghouse Electric Corp. led by Chemical Bank in August 1995. By Securities Data's reckoning, the loan is simply the largest since a $13 billion loan for Norfolk Southern led by J.P. Morgan and Merrill closed in February 1997.

Regardless, Texas Utilities' debt has recently been reaffirmed as investment-grade.

Dallas-based Texas Utilities hadn't even entered the bidding until March, nearly 10 months after Portland, Ore.-based PacifiCorp filed its initial friendly bid of $5.8 billion. That bid and subsequent ones were backed by financing from Goldman, Sachs & Co., J.P. Morgan & Co., and Citibank.

As the stakes were raised, competition between the rival financiers became contentious. The J.P. Morgan-Goldman-Citibank side began locking banks into covenants "not to participate" in the Texas Utilities deal, should it win, according to bankers on both sides of the deal.

Mark Golden, a spokesman for J.P. Morgan in New York, declined to comment on the charge. But banking sources say that although such agreements were made, fewer than five banks signed the agreement.

By last week the escalating bidding for Energy Group drove PacifiCorp out of the deal, leaving Texas Utilities the winner by default, its last bid at $7.4 billion. PacifiCorp's last offer was close to $7 billion. Both bidders said they would assume Energy Group's $4.1 billion debt.

Texas Utilities also agreed to sell Energy Group's Peabody Coal unit to the merchant-banking arm of Lehman Brothers Inc. for $2.5 billion.

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