By Michelle Sierra
NEW YORK May 23 Activist investor Carl Icahn
and Southeastern Asset Management Inc have initiated talks with
banks and asset managers to line up commitments for as much as
$7 billion in bridge loans to back their leveraged
recapitalization proposal for Dell Inc, banking sources
told Thomson Reuters LPC on Thursday.
Jefferies & Co is leading the deal.
Icahn and Southeastern are looking to lock in the financing
before Dell shareholders meet in July to vote on a rival
take-private offer from CEO Michael Dell and Silver Lake
Partners. Icahn and Southeastern are seeking at least $5.2
billion and as much as $7 billion in lender commitments, sources
"They want the shareholders to know that they have an
alternative," another source said.
Jefferies is understood to have committed $1.6 billion to
the bridge loan.
The arranger is asking for commitments as large as $1
billion and is expected to have lenders lined up as early as
Lenders committing to the deal are being offered a fee
upfront of 3.5 percent, which is typical of these transactions.
As an added sweetener, Icahn and Southeastern are also offering
lenders an additional 7.5 percent of any incremental profit the
two shareholders receive if Silver Lake prevails with an
Pricing on the loan is guided at 350bp over Libor, though
pricing could change as syndication efforts are only in the
early stages, the same sources said.
Jefferies and Icahn declined to comment. Calls to
Southeastern and Dell were not returned by press time.
In a May 9 letter to Dell's board, Icahn and Southeastern
Asset Management, two of the company's largest shareholders,
proposed an alternative to a buyout deal led by founder Michael
Dell and private equity firm Silver Lake Partners. Under the
Icahn proposal, shareholders could hold onto existing stock with
the option of receiving either a distribution of $12 per share
in cash or $12 per share in stock valued at $1.65 per share.
If Dell's shareholders accept the Icahn and Southeastern
offer, the bridge loan will become permanent financing.
Michael Dell and Silver Lake Partners, who are looking to
take the company private for $13.65 per share, or $24.4 billion,
have already received $13.75 billion in debt commitments from a
number of banks and Microsoft Corporation to back their
offer. Bank of America Merrill Lynch, Barclays, Credit Suisse
and RBC Capital Markets agreed to provide $11.75 billion in bank
lines and Microsoft agreed to purchase up to $2 billion in
Icahn and Southeastern, which together own about 13 percent
of Dell stock, have argued that the Silver Lake offer
undervalues the company.
Dell's shares rose 0.01 percent to $13.37 Thursday