Report: Carl Icahn and Jefferies Have Lined Up $5.2 Billion For Loan Commitments To Buy Dell Inc. (DELL)
Carl Icahn, a billionaire investor, and Jefferies & Co. have lined up $5.2 billion in loan commitments that would back Icahn’s leveraged recapitalization to buyout Dell Inc. (NASDAQ:DELL). Several banks and institutional investors signed up to participate at the initial structure and price guidance. Icahn’s deal will be financed with $7.5 billion of cash on the balance sheet, a $5.2 billion credit facility, and $2.9 billion from the sale of receivables.
The debt financial was crucial for increasing the credibility of the offer that Icahn and Southeastern Asset Management made to buy out Dell. This deal counters one that was proposed by Dell founder Michael Dell and Silver Lakes Partners. Michael Dell’s deal is worth $24.4 billion at a buyout of $13.65 per share. Icahn believes that this offer undervalues the company.
ISS, a shareholder advisory group, is going to publish their viewpoint on Michael Dell’s bid. On July 18th, a shareholder vote for Michael Dell’s plan to take Dell private will happen. The $5.2 billion loan commitment includes a $2.2 billion six-year term loan B-1 and $3 billion 3.5-year term loan B-2.
According to the Chicago Tribune, “pricing on the TLB-1 is set at LIB+400 with a 1 percent Libor floor, while pricing on the TLB-2 is set at LIB+350 with a 75 basis-point Libor floor. Both tranches are offered at a discount of 99.5 cents on the dollar and will carry 101 soft call protection for one year.” The lenders will share in the profits if a different and higher bid takes place. The join lead arranges will earn 7.5% of the difference between the winning bid and Michael Dell’s $13.65 per share offer times the 227 million shares that Icahn and Southeastern own jointly.
This loan would also pay a 1.5% underwriting fee and 2% arrangement fee. The six year loan will have a 1% amortization rate and the shorter loan amortizes at 10% per year.