Vivendi SA increased the interest margin on a planned 1 billion-euro ($1.3 billion) credit line in a concession to embattled European banks, according to two people with direct knowledge of the transaction.
The owner of the world’s largest music and video-game companies offered to pay 85 basis points more than the euro interbank offered rate on the credit line after days of talks with lenders who rejected the 75 basis-point margin it initially proposed, the people said. The pricing is a compromise with banks who last week asked for a 90 basis-point margin.
French lenders, with the heaviest investments in crisis-hit countries, are withdrawing from regular clients in the syndicated loan market as sovereign losses threaten their capital provisions. Banks across Europe have pledged to cut more than 950 billion euros of assets over the next two years, according to data compiled by Bloomberg.
“Banks are approaching the deleveraging process in two ways,” said Duncan Warwick-Champion, corporate debt analyst at European Credit Management Ltd., the London-based asset manager owned by Wells Fargo & Co. “One is simply to not extend new loans as old ones mature, the other is to make loans more expensive.”
At $681 billion as of June, French banks have the highest holdings of public and private debt in Greece, Ireland, Italy, Spain and Portugal, according to data from the Bank for International Settlements.
Simon Gillham, a spokesman for Vivendi, declined to comment on the pricing change, which was reported by Reuters earlier today.
The loan will include an upfront fee of 40 basis points and have a five-year maturity with no extension options, the people said. Vivendi is contacting banks itself to arrange the so-called club loan, the people said.
The loan will help fund the company’s business and renew expiring credit lines, the people said.
Banks including BNP Paribas SA, Citigroup Inc., Credit Agricole CIB and Societe Generale SA arranged a five-year loan last year with an initial interest margin of 55 basis points, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
Standard & Poor’s and Fitch Ratings rank Vivendi at BBB. Moody’s Investors Service rates it at Baa2.