LPC-Vodafone weighs $30 bln loan for bid
By Tessa Walsh
(ed. It's beginning to look like the 'We'll get it at ANY price' mentality is taking over)
LONDON Nov 16 (LPC) - British-based cellphone giant Vodafone Airtouch Plc is considering raising a loan of around $30 billion to back a fresh bid for German telecoms and engineering concern Mannesmann AG , banking sources said on Tuesday.
The company held meetings with bankers in London on Tuesday to discuss the loan, which could be used to refinance the Mannesmann debt, sources said.
``No deal has been put together yet, but discussions on what might or might not be feasible are taking place,' one of Vodafone's relationship bankers said.
Advisory and loan mandates typically go hand in hand, and Vodafone's advisers, Goldman Sachs and Warburg Dillon Read, are widely expected to lead the loan.
Morgan Stanley, Merrill Lynch, Deutsche and JP Morgan are advising Mannesmann on its defence.
Mannesmann's legal conflict of interest challenge to Goldman Sachs, which has forced the bank to temporarily withdraw from advising Vodafone until a court hearing on Thursday, is being played down by bankers eager to see a deal.
``Its a temporary nuisance, there are so many conflicts in this situation that this complaint doesn't hold much water,' a banker close to the deal said.
REFINANCING REQUIREMENT
Mannesmann debt will need to be refinanced due to change of control provisions included in the documentation of existing loans, which will be triggered by a takeover.
Both companies have been some of the loan market's most active borrowers this year, and have large outstanding loans.
Vodafone financed its merger with AirTouch of the U.S. with a $10 billion loan in March.
Mannesmann has raised a total of 22 billion euros ($22.75 billion) this year -- 7.65 billion euros for its acquisition of Italian operators Omnitel and Infostrada, 2.0 billion euros for the purchase of Otelo of Germany in May.
Mannesmann's largest and most recent 12.6 billion euro loan, which was raised to back its acquisition of British cellphone group Orange Plc (quote from Yahoo! UK & Ireland: ORA.L), is the only facility which is still outstanding.
The large size of the prospective Vodafone loan has sparked lively loan market debate on liquidity, as a number of major arranging banks are conflicted, and a millennium-related credit crunch is still a possibility.
The advocates of a Vodafone loan argue that the loan market would not see a dramatic increase in exposure to the telecom sector as the prospective deal will refinance existing debt.
``There will be no incremental debt - Mannesmann's debt would simply be replaced by Vodafone debt,' a banker said.
Critics, however, are drawing attention to the large concentration in Vodafone's debt.
Unlike other large jumbo loans seen this year which have been quickly reduced through capital market takeouts -- Olivetti's 22.5 billion euro loan was reduced to 6.5 billion euro before being taken out six months after its bid by a bond issue -- Vodafone still has the full $10 billion outstanding.
Of the existing $10 billion loan, $7.5 billion is still unused, as the company has only drawn down the $2.5 billion tranche B.
But Vodafone is unlikely to be able to use this loan for the Mannesmann acquisition, according to bankers close to the deal.
Vodafone does not require committed financing to make the bid under German stock exchange regulation, and the loan may have as long a lead time as its predecessor, which took several months to reach the market after it was announced. |
