Carl Icahn Lines Up Financing For Dell Leveraged Buyout

Carl Icahn Lines Up Financing For Dell Leveraged Buyout
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Carl Icahn has reportedly secured all of the $5.2 billion in financing he projected would be needed for his leveraged buyout proposal for Dell Inc (NASDAQ:DELL). Last week it was reported that Jefferies was preparing the loan needed for Carl Icahn’s Dell bid, and today Reuters’ Michelle Sierra and Leela Parker report that the financing is all set.

Carl Icahn Lines Up Financing For Dell Leveraged Buyout

Details On Carl Icahn’s Loan Package For Dell

According to the report, a number of institutional investors and banks have signed up to take part in the loan package. It was expected that Carl Icahn’s financing would be prepared by today before he meets with the influential shareholder advisory firm Institutional Shareholder Services later this week.

Included in the loan package is a $2.2 billion B-1 loan with a six-year term. And a $3 billion B-2 loan with a 3.5-year term. The TLB-1 is priced at LIB + 400 and has a 1 percent Libor floor. The TLB-2 pricing is set at LIB + 350 with a Libor floor of 75 basis points. There’s a 99.5 cent discount on the dollar for both tranches, which also have 101 soft call protection for a year.

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Perks For Investors

Sources told Reuters that the pricing and structure of the loans and also the low leverage of 1.7 times made the package look attractive to investors. Lenders will also get some of the profits if a different but higher bid for Dell Inc (NASDAQ:DELL) ends up winning.

The joint lead arrangers will reportedly receive 7.5 percent of whatever the difference ends up being between the bid that wins and the current offer of $13.65 per share, times the 227 million or so shares which Carl Icahn and his partner Southeastern Asset Management own jointly.

The structure of the loans also includes an underwriting fee of 1.5 percent and an arrangement fee of 2 percent. The six-year loan comes with 1 percent amortization, and the 3.5 year one has a 10 percent per year rate.

Carl Icahn’s Plans For Dell

Carl Icahn has said that his tender offer proposal will be financed with $7.5 billion of the cash that’s on Dell Inc (NASDAQ:DELL)’s balance sheet, plus the $5.2 billion credit and $2.9 billion from selling the company’s receivables. Dell’s board however, has said that he’s short by almost $3 billion in his estimations. Carl Icahn responded last week that the go-private offer from founder Michael Dell would result in more debt for the struggling PC maker.

Dell shareholders will vote on the go-private offer on July 18, and if Carl Icahn’s alternative offer wins, the loans will then be available to more institutional investors before Sept. 30 or for the loans’ three-month commitment period.

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