Walt Disney Co. has asked five banks to pitch financing proposals later this month for its $19 billion acquisition of Capital Cities/ABC Inc.
Bankers familiar with the situation said Disney will listen to separate proposals from BankAmerica Corp., Bankers Trust New York Corp., Citicorp, Chemical Banking Corp., and Credit Suisse during the week of Aug. 21.
The Burbank, Calif., entertainment conglomerate probably will select lead lenders from that group by Labor Day, bankers said. But they did not rule out other banks being invited to make proposals.
Disney officials are "exploring all their options at this point," said Jill S. Krutick, a media analyst at Smith Barney Inc.
Ms. Krutick said the expectation is that the company would borrow about $10 billion for the acquisition. The combined company will "take on debt to potentially the 50% range, which would result in a little less flexibility than they had, but certainly more flexibility than their competitors," she said.
Bankers said the size of the bank facility could be anywhere from $5 billion to $10 billion, depending on how the bankers propose to structure a deal. It is likely to be a backup line for Disney, which is in a good position to raise money in the commercial paper market.
Although pricing on the investment-grade credit is expected to be thin, bankers are eager to participate, in part to get a leg up on offering other financial services to the huge company.
"Clearly the market view is that this company will have little difficulty raising the amount," said one banker. "This is a great franchise. They will have little difficulty attracting favorable terms."
The Disney loan could be the biggest loan to result from a consolidation of the media and entertainment industry since the $14 billion loan that allowed Time Inc. to buy Warner Communications in 1989.
Word that the Disney financing is moving forward comes shortly after J.P. Morgan & Co. and Chemical brought a $7.5 billion loan to market for Westinghouse Electric Co.'s purchase of CBS.
The mergers, which are driven in part by regulatory reforms affecting cable and telephone companies, are predicated on the notion that companies will be stronger if they can produce, format, and distribute programming under one roof.
Ms. Krutick of Smith Barney predicted financing opportunities for more media mergers, especially from programming companies that are under increased pressure to find partners. She also said bankers can expect additional loan opportunities a few years from now, when the conglomerates begin to spin off noncore units, as Time Warner has started to do.
Ms. Krutick, who has said that Disney would be the standard against which all other players are judged, warned that in some cases earnings and cash flow from a merger may not live up to expectations. But she was positive about the prospects for Disney and Westinghouse.
Observers had predicted that Citicorp, which led a $1 billion five-year revolving line of credit for Disney in April, would have the inside track on the acquisition financing. Chemical has acted as agent bank to Capital Cities.
BankAmerica also had been mentioned as a possible leader in the financing because of its historical ties to Disney. Bankers Trust and Credit Suisse have also lent to Disney and provided other kinds of financial services in the past.
Bankers said pricing of a backup line for the acquisition is likely to be similar to that of the earlier line, which had a spread of 12.5 basis points over the London interbank offered rate and an annual fee of 7 basis points.
Disney pays 19.5 basis points over Libor on the portion of the line it draws upon, and could pay a few basis points more than that for the new loan.
