Citi Syndicating Sharply Smaller Loan, New Note Package for Fox Kids

Citicorp began syndication last week of a revamped loan and securities package for Fox Kids Worldwide's acquisition of International Family Entertainment.

The loan, which was first brought to market in early July, has been reduced in both price and size. Originally launched at $1.25 billion, the new credit is only $710 million.

A road show for $725 million in an issue of senior notes and senior discount notes, subordinate to the bank debt, is expected to begin this week, said a source familiar with the transaction.

After what market observers termed a difficult syndication, the original Fox Kids loan closed Aug. 1 with a bank group of 15 lenders.

But Citicorp "stopped the syndication process," a source said, "to structure this more favorably for the company and for the banks, by putting in a slug of structured subordinated notes."

That was Citicorp's "intent all along," the source said.

Others in the market saw the restructuring differently. They pointed out that Citicorp was left holding close to $700 million of the original Fox Kids loan, which was more than the bank originally intended.

"All that's happening" is Fox Kids cut Citicorp "a break and they're relieving them and doing a securities offering to help bring their numbers down," said the lender, who spoke on condition of anonymity.

The revised seven-year bank loan, which is expected to be rated BB by Standard & Poor's, is split between a $355 million revolving credit and a $355 million term loan.

Pricing on the revamped loan is tied to Fox Kids' new leverage ratio, which currently sees senior debt at 3.5 to 4 times earnings. It begins at 150 basis points over the London interbank offered rate.

The original loan was priced at 225 basis points over Libor at a leverage ratio of more than seven times total debt to earnings.

Up-front fees on the new deal are 12.5 basis points, paid upon allocation of the loan. Because the deal is being syndicated only to the 15 lenders in the credit, who were paid fees on their commitments just last month, the fees are "just a sweetener" said the source.

No bank meeting was held on the new credit, and commitments on the new loan are due this week, said the source.

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