CS First Boston is set to finance CalEnergy's $1.23 billion hostile bid for the British utility Northern Electric PLC.
The financing is expected to be finalized next week and include a sizable bank loan. Lenders said Tuesday the loan would be well-received by the market, as bankers are anxious to invest in the British power industry.
"The whole cycle of power deregulation is really just starting," said Kathy Pattison, senior managing director in loan syndications at Bank of America. "This consolidation activity will continue, and there is a very strong appetite for acquisition financing."
CE Electric U.K. PLC, which is majority held by CalEnergy Co. of Omaha, announced Monday an unsolicited bid for Northern Electric, which was privatized in 1990. Northern promptly rejected CalEnergy's offer as "inadequate" but ambitious CalEnergy is expected to push for a deal.
CS First Boston, which is advising CalEnergy on this transaction, has a long relationship with the acquisitive utility. Last year, it helped finance CalEnergy's hostile buyout of Magma Power Co., underwriting loans, bonds, and equity for the $957 million deal.
While bankers are eager to finance the quickly consolidating U.K. utility market, they are selective about backing hostile bids. Bankers consider hostile transactions on a case-by-case basis, and some even have policies that limit or restrict financing available for the deals.
"Banks must look at the size of the deal, and what kind of relationships they have before they pursue transactions," Ms. Pattison said.
"You must evaluate the relationship with the target, as well as what additional credit risk there is, when the other side has not opened up," added another banker.
CS First Boston's parent, CS Holding, is set to be renamed Credit Suisse Group on Jan. 1. As part of that reorganization, CS First Boston's investment bank will be merged with Credit Suisse, the commercial bank, outside of Switzerland.
