Magazine article American Banker

Banks Help Union Pacific Up Ante with $3.7B Loan

Magazine article American Banker

Banks Help Union Pacific Up Ante with $3.7B Loan

Article excerpt

Citicorp, NationsBank, and Credit Suisse rallied behind Union Pacific Corp.'s latest bid for Santa Fe Pacific Corp. with a new $3.7 million loan that replaces a $2 billion loan issued just a month ago.

The stakes in the bidding war between Union Pacific and Burlington Northern for control of Santa Fe's valuable Chicago to Los Angeles lines continue to rise for both railroads and their banks.

Union Pacific plans to use its loan to finance last Wednesday's all-cash offer of $3.6 billion, valued at $18.50 per share.

To support Union Pacific's bid, the three banks invited the original 27 banks in the loan syndicate to a teleconferenced bank meeting last Friday. Only a handful of new banks were expected to join the larger loan.

Commitment levels reached about $3.8 billion for the original facility, the approximate amount of the new loan.

The three lead banks will divide the underwriting equally. The banks also plan to use the original pricing for the loan, with some minor modifications in the up-front fees.

The loan is divided into a five-year, $3 billion facility and a $700 million, one-year facility.

As eager as they have been to fund the merger, banks were almost shut out of the deal. The original merger arrangement signed last June by Burlington Northern and Santa Fe required no bank financing.

With this latest loan, however, banks have underwritten $5.76 billion of loans to the three railroad companies.

Burlington Northern has a $500 million loan led by Chemical Banking Corp., while Santa Fe itself has a $1.56 billion facility underwritten by J.P. Morgan & Co., Chemical, Chase Manhattan Corp., Union Bank of Switzerland, and Goldman, Sachs & Co. Morgan is administrative agent on the latter loan.

In some bases, banks have signed on to competing bids.

Only the Union Pacific loan is contingent on a successful merger. …

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