Viacom Inc.'s lead banks have asked prospective agents and co-agents to commit by the end of this week to a $1.5 billion credit backing the company's bid for Paramount Communications Inc.
The three banks - Bank of New York, Citibank, and Morgan Guaranty Trust Co. -- have signed exclusivity agreements with Viacom, prohibiting them from working with QVC Networks Inc. or any other rival bidders for Paramount.
Agents Can't Work Both Ends
Banks that commit to participate as agents on the Viacom credit also will be required to sign exclusivity agreements, while co-agents will be free to work both sides of the takeover battle.
In requiring the exclusivity agreements, Viacom is apparently trying to lock up as many banks as it can in order to make it more difficult for QVC to arrange financing for its own bid.
The tactic, though, is unlikely to present much of a hurdle to QVC in lining up commitments for the $3.6 billion cast portion of its $9.9 billion Paramount bid.
A $2.6 Billion Hole to Fill
QVC has already raised $1 billion of financing for the cash portion from its two major shareholders, Liberty Media Inc. and Comcast Corp., leaving a $2.6 billion hole for banks to fill.
Bank financing could approach $3 billion, with the additional funds covering fees and other expenses.
Among the banks rumored to be in the running to lead the QVC bank financing are Bankers Trust, Chase Manhattan Bank, Chemical Bank, NationsBank, and Toronto-Dominion Bank.
Officials at all of those banks either refused to comment or didn't return phone calls.
QVC didn't return call for comment on the status of its fund-raising.
QVC's Financing Plans Unclear
It's unclear whether QVC is seeking a fully underwritten commitment for the bank financing, or if it would settle for a partially underwritten deal.
Viacom secured a fully underwritten commitment from its three banks, so QVC may feel compelled to do the same.
Paramount's board is holding out for evidence of financing before it negotiates with QVC.
As of Wednesday afternoon, the $1.5 billion Viacom bank credit had not yet found any takers, beyond the three lead banks, though the search for agents and co-agents had just gotten under way.
Bank of New York, Citibank, and Morgan committed $500 million apiece to the deal, leaving each of the banks with a sizeable underwriting exposure.
The financing, though, is said to be structured as a 364-day revolver. As long as the commitments remain unfunded, the banks are not required to post any capital under the risk-based capital guidelines.
A Blockbuster Deal
The $1.5 billion bank financing would cover the $1.1 billion cash portion of Viacom's bid, currently valued at about $7.8 billion in cash and stock.
The company, which has been under pressure to increase its bid to compete with QVC's offer, announced Wednesday that Blockbuster Entertainment agreed to purchase $600 million of Viacom preferred stock.
Though Viacom didn't specifically state that the funds would be used to sweeten its Paramount offer, the announcement conveyed that impression. Deal at a GlanceBorrower Viacom Inc.Amount $1.5 billionLead Bank of New Yorkbanks Citibank Morgan GuarantyPurpose Acquisition financing