NationsBank Texas beat out four other bidders to lead a new financing of up to $500 million for LDDS Communications Inc., a long-distance phone company based in Jackson, Miss.

Among those competing was First National Bank of Chicago, the agent bank on an existing LDDS revolving credit line.

The new financing is being arranged in conjunction with the planned merger of LDDS and Advanced Telecommunications Corp., another long-distance phone company that is based in Atlanta. LDDS will be the surviving entity in the merger, announced last month. The combination will be accomplished through an exchange of shares.

Replacing Credit Lines

Most of the proceeds from the new credit agreement will be used to replace about $300 million of existing bank lines at both LDDS and Advanced Telecom. The remainder could be used for further acquisitions.

First Union National Bank of North Carolina, agent bank on the Advanced Telecom credit, also bid to lead the new financing. In addition to First Union and First Chicago Corp.'s banking unit, the other losing bidders were Bank of Nova Scotia and Canadian Imperial Bank of Commerce. All four banks are expected to be invited to participate as co-agents. Officials at these banks either declined to comment or couldn't be reached.

While there's been no decision on the exact size of the credit, the range is $400 million to $500 million.

Ironing Out the Details

Representatives of NationsBank Texas are scheduled to meet today with LDDS executives in Jackson to sort through a number of issues, including the total amount of the loan and the size of NationsBank's underwriting commitment.

The bank told LDDS it would be comfortable underwriting around $100 million of the total credit.

Given its standing as the existing agent bank for LDDS, First National Bank of Chicago was the bank to beat in the bidding to lead the new credit.

NationsBank, though, had geography in its favor. Its markets and those of LDDS overlap pretty neatly. Details of the various bids couldn't be learned, though the borrowing rate on the new loan is said to be somewhere between 100 and 150 basis points over the London interbank offered rate. LDDS has been paying a rate of 200 or more basis points over Libor on its existing revolver, which was classified as a highly leveraged transaction.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.