Billionaire investor Carl Icahn asked for a meeting with Dell Inc’s special board committee after lining up $5.2 billion in loan commitments to back up his bid for a leveraged recapitalization of the personal computer maker.<\/p>\n
Icahn, in an open letter to Dell shareholders, said that financing commitments included $1.6 billion from Jefferies Finance LLC, which will publicly file the papers after markets close on Monday.<\/p>\n
“With that we put an end to the unwarranted speculation by Dell that our money would not be available,” Icahn said in the letter.<\/p>\n
Obtaining the debt financing marks a critical step forward for Icahn’s and Southeastern Asset Management’s alternative bid for the company. Icahn and Southeastern are asking shareholders to tender 1.1 billion shares at $14 apiece.<\/p>\n
The tender offer compares with founder Michael Dell’s and Silver Lake Partners’ $24.4 billion buyout at $13.65 a share, a price Icahn said substantially undervalues the company. Dell’s special board had recommended Michael Dell’s offer to shareholders.<\/p>\n
Ichan’s effort at putting together a superior competing bid for Dell has been rebuffed so far by the special board committee. He asked for a face to face sit down meeting with the board to discuss the offer.<\/p>\n
A Dell spokesman was not immediately available for comment.<\/p>\n
Icahn was expected to have the financing ready by Monday, ahead of an ISS meeting that could take place as early as this week. ISS is a shareholder advisory group that is expected to publish its view on Dell’s bid. A July 18 shareholder vote on Dell’s take private plan will follow.<\/p>\n
The $5.2 billion financing includes a $2.2 billion, six-year term loan B-1 and a $3 billion, 3.5-year term loan B-2, sources told Thomson Reuters LPC.<\/p>\n
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.<\/p>\n
The pricing, original issue discount and fee structure, as well as low leverage of 1.7 times, made the loan package attractive to investors, said sources evaluating the transaction.<\/p>\n
As an unusual perk, lenders will share in the profits if a different but higher bid prevails. Joint lead arrangers will earn 7.5 percent of the difference between the winning bid and Dell’s current $13.65 per share offer times the roughly 227 million shares that Icahn and Southeastern jointly own.<\/p>\n
The loan also pays a 1.5 percent underwriting fee and a 2 percent arrangement fee. The six-year tranche will have standard 1 percent amortization, while the shorter-dated tranche amortizes at 10 percent per year.<\/p>\n
Icahn’s proposed tender offer will be financed with $7.5 billion of cash on the balance sheet, the $5.2 billion credit facility and $2.9 billion from the sale of receivables.<\/p>\n
If Icahn’s alternative proposal prevails, the loans would launch to a broader range of institutional investors before September 30, or the three-month commitment period of the $5.2 billion loans, according to sources.<\/p>\n
Icahn promises $16 billion buy-back of Dell stock<\/a><\/strong><\/p>\n Icahn short on cash for Dell proposal: committee<\/strong><\/a><\/p>\n Dell presented with more alternatives to buyout<\/a><\/strong><\/p>\n