Chemical Bank, Citibank, and Bank of Montreal are leading a $2 billion credit to help Seagram Co. finance its planned purchase of up to 15% of Time Warner Inc. stock.
At a press briefing after the company's annual meeting in Montreal on Wednesday, Seagram chairman Edgar Bronfman disclosed the new credit line but did not identify the lead banks.
Chemical's role in the Seagram credit places the bank in a somewhat delicate position, because it is also one of Time Warner's two lead banks.
On the surface, though, any potential conflict for Chemical appears fairly remote for now.
On 'Friendly' Terms
Seagram, in disclosing its initial 5.7% stake in Time Warner last week, declared itself a "friendly" investor. Time Warner, in turn, responded by saying it "welcomes" Seagram as a shareholder.
Seagram has held a major stake in E.I. du Pont de Nemours Co. since 1981, so far without evidence of any hostilities.
Still, Seagram's disclosure of its interest in Time Warner sparked speculation last week that the Canadian company's intentions could prove to be less than friendly'
A Time Warner spokesman declined to comment on Chemical's involvement in Seagram's financial arrangements.
Chemical, though, was the natural choice as administrative agent for the new Seagram credit because the bank serves the same role for an existing $400 million credit line.
Citibank and Bank of Montreal are also co-agents on that deal.
The $400 million revolver, which was due to expire in December, is being rolled into the new credit line.
No Commercial Paper Rating
It's expected that the $2 billion line will be used as a backstop for the issuance of commercial paper.
At the moment, Seagram does not have a commercial paper rating from either of the two major credit rating agencies.
Seagram's senior unsecured debt is rated A by Standard Poor's Corp., and A2 by Moody's Investors Service.
The Moody's rating is under review for possible downgrade.
Terms of the new credit line are still being hammered out.
It also was not immediately clear how much of the $2 billion would be underwritten by the three lead banks, or when they are planning to launch the deal in the loan syndication market.