Chase Manhattan Corp. and Barclays de Zoette Wedde are arranging an approximately $2.3 billion loan for Southern Electric PLC's bid for Southern Water PLC.

Southern Electric has made a $2.42 billion friendly offer for the company, topping Scottish Power PLC's $2.35 billion bid.

The bids for Southern Water come during a period of rapid consolidation in the utilities industry, with 10 utility acquisitions in the last year and a half.

Indeed, Chase and Barclays are catching one of the first waves of consolidation to hit the water industry.

The loan to Southern Electricity is the first syndicated facility for the electricity company, reflecting the increasing use of bank loans in the consolidation process.

The two banks equally underwrote the loan and are jointly managing the syndication effort, said market sources.

Barclays and Chase worked together on another recent utilities deal, joining Citicorp on a loan of over $3.1 billion for General Public Utilities and Cinergy Corp.'s bid for Midlands, PLC.

Sixty-five percent of the Southern Electric deal will be financed by bank loans, with equity supporting the remainder of the bid.

The loan both supports the acquisition and refinances some outstanding debt.

The five-year revolving credit, which has no amortization, will be syndicated in Europe in the next few weeks.

The banks are expected to seek coarrangers in the next week at the $150 to $230 million level.

The credit is expected to have a margin of the London interbank offered rate plus 20 basis points for the first two years, and Libor plus 22.5 for years three, four, and five.

Market sources said the company will have approximately 55% to 60% debt to capitalization, and will have four times interest coverage after the deal.

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