Chemical Bank will help finance the planned purchase of Du Pont's electronic connectors business by Hicks, Muse & Co. for about $400 million.
The Dallas buyout firm beat out at least several corporate bidders for the business, a source familiar with the situation said Friday.
E.I. du Pont de Nemours & Co. is said to have favored the Hicks Muse bid in part because, as a financial buyer, the Dallas firm is more likely to retain the existing management team of the connectors business.
A Du Pont spokesman Friday would neither confirm nor deny the selection of the Hicks Muse bid. A Hicks Muse spokesman also declined to comment.
The giant Wilmington, Del., chemical and energy company said in May that it planned to either sell the connectors business or spin it off in a public offering.
$400 Million in Revenue
At that time, Du Pont said worldwide revenues from the connector business exceed $400 million.
Bank financing for the deal will total $260 million and is expected to consist of a $180 million term loan and an $80 million revolver.
The interest rate on the loans will be 275 basis points over the London interbank offered rate.
It wasn't immediately clear how much of the credit will be applied to the purchase price, and how much, if any, will be used for working capital, or other purposes.
Equity, Mezzanine Financing
In addition to the bank debt, Hicks Muse will use a combination of equity and mezzanine financing.
The buyout firm is said to be working in partnership with Donaldson, Lufkin & Jenrette Securities Corp.
Chemical initially bid against rival Bankers Trust to underwrite the bank financing.
It's expected that the connector business's cash flow will exceed annual interest costs by a ratio of about two to one. Total debt won't exceed cash flow by more than five times.
Prospects for Syndication
Chemical, meanwhile, may decide to postpone the launch of the credit in the loan syndication market until January.
Syndicating a loan at the end of the year can be difficult, in part because of holiday-related scheduling conflicts.
In addition, many banks by now have already reached their loan production budgets for 1992 and may be more eager to book new assets at the beginning of the new year.
Booking an asset and reserving against it at the end of the year also does not allow much time for the asset to generate any earnings for that year.