Carl Icahn Seeking $5.2 Billion in Loans for Dell Takeover Bid

Carl Icahn is approaching investors for $5.2 billion in loans backing his buyout offer for personal computer maker Dell Inc.

Icahn tapped Jefferies Group LLC to arrange a $2.2 billion six-year term loan and a $3 billion 3 1/2-year term piece, according to a person with knowledge of the offering, who asked not to be identified because terms aren’t set. Jefferies will host a call with lenders at 4 p.m. today in New York.

Icahn has teamed up with the bank to push ahead with a bid to oppose Michael Dell’s $24.4 billion buyout of the company he founded. The plan proposed by Icahn, who is seeking a bigger payout for shareholders, is “unrealistic” because of a $2.9 billion shortfall, Dell said in a regulatory filing today.

“Investors are clearly willing to listen and open to new ideas,” David Novosel, an analyst at Gimme Credit LLC in Chicago, said in a telephone interview. “The new proposal could have better or worse terms but investors on the debt side want to know what the equity commitments are. It helps Icahn if he offers concrete detail.”

The six-year loan will pay interest at 4 percentage points more than London interbank offered rate with a 1 percent minimum on the lending benchmark, the person familiar with the offering said. The $3 billion portion is being offered at 3.5 percentage points more than Libor with a 0.75 percent minimum.

Icahn is proposing a deal that asks Dell to tender 1.1 billion shares at $14 apiece, compared with $13.65-a-share deal outlined in a February proposal by Dell and private-equity firm Silver Lake Management LLC. Shareholders get to vote on that proposal at a special meeting set for July 18.

Previous Financing

The value of Icahn’s proposed $14-a-share offer would be reduced to about $8.15 a share based on the estimated shortfall, a special committee for Dell’s board said in the regulatory filing.

The original proposal to take Dell private consists of $13.75 billion in debt financing, including a $4 billion term B loan, a $1.5 billion C slice, a $2 billion asset-backed piece, and $3.25 billion of bridge facilities, according to a May 31 filing. Credit Suisse Group AG, Barclays Plc, Bank of America Corp. and Royal Bank of Canada are arranging the debt.

Icahn’s proposal is “unlikely to succeed,” Albert Saporta, an analyst with Makor Capital, said in a report today. “We keep the probability of the LBO going through on the original terms at 70 percent.”

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