Chemical Likely to Lead Big Financing for Hanson

Chemical Bank seems likely to secure a major role in Hanson PLC's pending bid to buy Beazer PLC for roughly $2.6 billion.

"We are starting to burn the midnight oil," said Royall Victor, a Chemical managing director in New York.

As the traditional lead bank for the giant British industrial conglomerate, Chemical has held preliminary talks with Hanson about financing the $609 million purchase, as well as refinancing existing Beazer debt of roughly $2 billion.

Talks Held Monday

Chemical bankers held their initial meeting on the deal with officials from Hanson on Monday, when the bid for Beazer was disclosed.

Details about the extent of financing or refinancing have not yet been hammered out, said Mr. Victor, who is responsible for Chemical's relationship with Hanson.

A spokesman for Hanson's U.S. subsidiary declined to comment on the bank talks.

Although Hanson and Beazer are based in Britain, both companies have established major presences in the United States through acquisitions.

Debt from Koppers Purchase

Indeed, most of the $2 billion of debt on Beazer's balance sheet stems from the British construction company's $1.8 billion purchase of Koppers Co., the Pittsburgh home builder, in 1988.

Citibank was Beazer's agent bank for the Koppers acquisition.

Before the Hanson bid, Beazer planned to spin off its European operations and base itself in the United States. Proceeds were to be used to pay off a portion of the loans led by Citibank.

However, as a result of the Hanson bid, the spin-off of Beazer's European operations has been put on hold.

Hanson, meanwhile, owns Peabody Coal Co. in Kentucky, the largest U.S. coal producer.

Last year Chemical led a group of banks that provided $2.6 billion in bank financing for the Peabody deal.

Citibank and National Westminster Bank were coagents.

With ties to both Hanson and Beazer, Citibank likely would be approached about participating in any new bank financing, though it wasn't immediately clear whether Citibank has been contacted yet by Chemical or Hanson.

Citibank officials in New York declined to comment.

It was also unclear whether Hanson's bank talks are limited to Chemical in the United States, or if Hanson is also talking simultaneously to NatWest -- its NatWest -- its principal British bank.

Based on past experience, any new Hanson credit is likely to be well received in the bank loan market.

The syndication last year of the Chemical-led financing for Hanson's purchase of Peabody was vastly oversubscribed, despited complaints from some bankers at the time that the credit was underpriced.

The credit, classified as a highly leveraged transaction, carried a spread of 50 basis points over the London interbank offered rate.

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