Chemical Bank beat out Bank of America to lead a $360 million loan backing Franklin Resources Inc.'s planned purchase of Templeton, Galbraith & Hansberger Ltd. for $913 million.

The combination of the two mutual fund companies, which is subject to shareholder approvals, was announced Friday.

Though B of A was on the losing side of a two-way bidding contest with Chemical, the California bank was named co-agent on the credit.

The two banks have fully underwritten the seven-year term loan in equal amounts of $180 million apiece.

Both banks initially submitted fully underwritten bids, according to a banking source.

Marketing Strategy Being Devised

As agent, Chemical presumably will collect more fees than B of A, and also will call the shots on syndicating the loan. Indeed, Chemical is not in the process of devising a marketing strategy, and has already sounded out some lenders about participating in the general bank syndicate.

"We're going to take a look at it," said the head of acquisition finance at one bank contacted by Chemical.

A meeting for potential syndicate members is expected to be held in the latter part of August.

Fees, commitment levels, and other issues relating to the structure of the syndicate are still being hammered out.

Lending to mutual fund companies is a fairly specialized field for banks, so the number of potentially syndicate members is somewhat limited.

At the same time, though, the credit could appeal to a wider audience, given the apparent financial strength of the combined mutual fund companies.

After the merger, cash flow will exceed debt costs by eight times, said a banker familiar with the deal.

The loan carries a borrowing rate of 100 basis points over the London interbank offered rate.

In addition to the bank loan, the acquisition is being financed with $150 million of 10-year debentures with warrants and cash on hand.

The 6 1/4% debentures have already been spoken for by a group of institutional investors led by Hellman & Friedman of San Francisco.

Both Banks Have Ties to Hellman

Chemical and B of A both have ties to Hellman as fund investors. Unlike Chemical, B of A also had strong ties to Franklin, which might have been expected to give the bank an edge in the bidding to lead the credit.

Though the bids are said to have been close, Chemical apparently took advantage of high-level contacts it had with Hellman officials.

Though Franklin is the borrower, Templeton founder John Templeton, 79, was closely involved in the drafting of the bank loan agreement.

At Mr. Templeton's urging, the parties bypassed the standard commitment letter phase, and executed a full-fledged credit agreement.

Chemical chairman John McGillicuddy personally signed off on the credit.

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