Carl Icahn Is Talking To Banks About Lining Up $7 Billion For Dell Deal

Posted May 24, 2013

Activist investor Carl Icahn and Southeastern Asset Management are talking to banks and asset managers to line up $7 billion in bridge loans for their leveraged recapitalization proposal for Dell, according to sources with Reuters.  Jefferies & Co is leading the bridge loan deal.

Icahn and Southeastern Asset Management want to lock in the deal before Dell’s shareholders meet in July to vote on a rival offer from Dell founder Michael Dell and Silver Lake Partners.  Michael Dell’s deal is to take the company private.  Icahn and Southeastern are seeking at least $5.2 billion and as much as $7 billion in lender commitments.  It is believed that Jefferies is committing around $1.6 billion to the bridge loan.  Lenders are expected to be lined up by as early as next week.

The lenders committing to the deal are being offered a fee upfront of 3.5%, which is about average for these types of transactions.  Icahn and Southeastern are also offering lenders an additional 7.5% of incremental profits that the two shareholders receive if Silver Lakes wins the deal with an increased offer.

The bridge loan will become permanent financing if the Icahn / Southeastern offer becomes permanent.

Michael Dell’s Deal

Michael Dell and Silver Lake want to take Dell private at $13.65 per share ($24.4 billion).  Michael Dell and Silver Lake have already received $13.75 billion in debt commitments from several banks and Microsoft Corporation.  Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets have agreed to offer $11.75 billion in bank lines and Microsoft is offering up to $2 billion in subordinated notes.

Carl Icahn’s Deal

Shareholders can hold onto existing stock with the option of receive either a distribution of $12 per share in cash or $12 per share in stock.  Icahn and Southeastern argue that Michael Dell and Silver Lake’s offer undervalues the company.