Icahn Announces $5.2B Financing For Dell Deal
July 2, 2013

Icahn Secures $5.2B To Finance Dell Deal

redOrbit Staff & Wire Reports - Your Universe Online

Carl Icahn and Jeffries & Co. have secured $5.2 billion in loan commitments backing the billionaire investors' leveraged recapitalization plans for computer maker Dell.

In an open letter to Dell shareholders, Icahn said the financing commitments include $1.6 billion from Jefferies Finance LLC.

"With that we put an end to the unwarranted speculation by Dell that our money would not be available," Icahn said according to Reuters.

Securing the debt financing represents a critical step forward for Icahn's and Southeastern Asset Management's alternative bid for Dell, which will ask shareholders to tender 1.1 billion shares at $14 each.

The tender offer slightly exceeds founder Michael Dell's and Silver Lake Partners' $24.4 billion buyout bid of $13.65 a share, a price Icahn said dramatically undervalues the company.

Dell's special board had previously recommended Michael Dell's offer to shareholders, and Icahn's move to offer a superior competing bid for Dell has so far been snubbed by the special board committee. Icahn, now Dell's second largest shareholder after acquiring 72 million shares last month, has asked the board for an in-person meeting to further discuss the offer.

The next major step in the process will come when the proxy advisory firm Institutional Shareholder Services issues its recommendations, which will be followed by a July 18 shareholder vote.

Shareholders representing about 18 percent of the proxy, including Icahn, Southeastern Asset Management and mutual fund firm T. Rowe Price, are already on record as opposing the Dell-Silver Lake bid.

Icahn's $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, Reuters reported on Monday.

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 pricing, original-issue discount, fee structure and 1.7 times leverage made the loan package attractive to investors.

In a rare perk, lenders will share in the profits if a different but higher bid prevails, with joint-lead arrangers earning 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.

The loan will pay a 1.5 percent underwriting fee and a 2 percent arrangement fee. The six-year tranche will have 1 percent amortization, while the shorter-dated tranche will amortize at 10 percent annually.

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.

If Icahn's bid 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, Reuters said.