Four lenders, led by J.P. Morgan Securities, have opened general market syndication for a $500 million loan to support Alliant Techsystems Inc.'s acquisition of Hercules Aerospace.

Alliant, the nation's largest munitions manufacturer, will use part of the loan to purchase the rocket motor division of Wilmington, Del.-based Hercules Inc. for $412 million.

Chemical Bank, NationsBank Corp., and Lehman Commercial Paper Inc. are serving as arrangers along with the Morgan unit on the loan, which will also provide some refinancing. Alliant is also going to the high-yield market for acquisition financing.

Alliant is the latest contractor to join a consolidation trend that is sweeping the defense industry.

"Most of the deals in the last few years were done by investment grade companies," said a banking source. As a result, the pricing and commitment levels on those deals were different than they are for Alliant.

J.P. Morgan is acting for Alliant as the lead arranger and the documentation agent, while Chemical is the administrative agent.

In general syndication, the arrangers are seeking commitments at both the $25 million and $15 million levels.

Up-front fees are 40 basis points for the higher commitment and 25 basis points for the lower commitment.

Market sources say that pricing will vary according to the borrowers credit rating. Initially, Alliant will pay the London interbank offered rate plus 125 basis points on the portion of the loan it uses.

By contrast, when Northrop Corp. sought $2.8 billion last April for its hostile acquisition of Grumman Corp., Chase Manhattan and Chemical led the deal without any co-agents. Pricing started at Libor plus 62.5 to 75 basis points, and up-front fees were 25 basis points.

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