A significant chunk of Viacom Inc.'s new $6.8 billion bank credit is expected to be repaid fairly quickly through asset sales and public debt and equity offerings.
The refinancing package, unveiled Friday, includes a $2.5 billion revolver, which is a bridge to asset sales and public offerings that have already been set in motion.
The credit will refinance existing bank debt, including a $3.7 billion bridge loan that helped finance Viacom's acquisition of Paramount Communications Inc.
Leading the refinancing as managing agents are the lead bank units of BankAmerica Corp., Bank of New York Co., Citicorp, and J.P. Morgan & Co.
Asset, Debt Sales Projected
Viacom said last Tuesday that it was exploring the sale of Madison Square Garden. Later in the week, the company filed a shelf registration covering the sale of up to $3 billion of senior debt and preferred stock.
The $2.5 billion revolver expires in 2-1/2 years, while the other components of the credit package - a $2.5 billion term loan and a $1.8 billion reducing revolver - expire in eight years.
Pricing was tied to Viacom's senior credit rating, which remains under review for a possible downgrading. Initially, Viacom will pay 131 basis points over the London interbank offered rate, the same rate it pays on its existing bank debt.
Viacom's implied senior debt rating is BBB-minus, but Standard & Poor's Corp. has said the rating is likely to be reduced to BB-plus or BB.
Pricing Is Called Tight
At BB-plus, Viacom would pay 118.75 basis points over Libor, and at BB, the Libor spread would be 143 basis points. That pricing assumes that Viacom's debt will exceed cash flow by 6.5 times or more.
A Viacom banker acknowleged that pricing was tight, given the company's leverage ratio. But Viacom's rich assets and its cachet as an entertainment giant probably will give the credit strong drawing power in the loan market.
Each of the four managing agents committed $750 million to the bank deal, for a total of $3 billion.
6 QVC Banks Invited
Nearly 30 banks were invited to Friday's meeting for prospective agents and coagents. The group consisted of Viacom relationship banks, as well as six banks that had backed QVC Network Inc.'s rival bid for Paramount.
Banks that commit $500 million will be designated as agents, and will get an up-front fee of $1 million, plus 55 basis points on allocation. At the coagent level of $250 million, the up-front fee is $500,000, plus 35 basis points on allocation.