Caterpillar Gets $8.6 Billion Loan for Bucyrus M&A

Caterpillar Inc., the world’s biggest maker of construction equipment, got an $8.6 billion bridge loan to buy Bucyrus International Inc.

JPMorgan Chase & Co. agreed to provide an unsecured bridge facility and Caterpillar may issue senior notes “and/or equity” instead of tapping the entire bank loan, the Peoria, Illinois-based company said today in a regulatory filing.

Caterpillar agreed to buy Milwaukee-based Bucyrus for $7.6 billion to add shovels and drills to its range of mining machinery. Bucyrus shareholders will receive $92 a share, 32 percent more than the Nov. 12 closing share price, Caterpillar said in a Nov. 15 statement. The deal is valued at $8.6 billion including net debt and Caterpillar said it will fund the purchase with a combination of cash, debt and as much as $2 billion of equity.

The bridge loan would have an increasing interest rate starting at 1.25 percentage points to 2 percentage points more than the London interbank offered rate, an agreement attached to the filing shows. The margin over Libor, the rate banks charge to lend to each other, is tied to the company’s credit ratings.

The spread over the lending benchmark would increase every 90 days, first climbing to a range of 1.5 percentage points to 2.25 percentage points and ultimately peaking at a range of 2.375 percentage points to 3.125 percentage points, according to the agreement.

Caterpillar said it would have to maintain a consolidated net worth of at least $9 billion under the agreement.

To contact the reporter on this story: Emre Peker in New York at epeker2@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.