Magazine article American Banker

Banks Rally to Chrysler in Face of Buyout Bid

Magazine article American Banker

Banks Rally to Chrysler in Face of Buyout Bid

Article excerpt

Bankers are adding provisions to an $8 billion loan to Chrysler

Financial Corp. that could work against financier Kirk Kerkorian's buyout bid for Chrysler Corp.

By Wednesday, the refinancing, led by Chemical Banking Corp., had almost $7 billion in commitments, with little more than half of Chrysler's group of over 80 banks reporting.

Bankers' eagerness to participate in the refinancing for the Chrysler unit - and the cozy relationship between Chrysler and its banks - casts doubt on Mr. Kerkorian's ability to raise the $12 billion loan he would need to complete his hostile $22.8 billion deal.

What's more, the bankers are expected to add provisions to the loan agreement to protect their financial interests in the event that Mr. Kerkorian succeeds in his bid to buy the Highland Park, Mich., automaker.

One probable approach, bankers said, would be a covenant that triggers a default if a company's debt exceeds a preset level or if its debt rating falls.

Such a covenant would weigh against a leveraged takeover like the one proposed by Mr. Kerkorian's Tracinda Corp., but it would not affect a cash deal.

Chemical declined to comment on the loan.

Market sources said that banks' commitments to the deal prior to

learning exactly what form the takeover protection might take reflected the strength and commitment of Chrysler's bank group.

Protective of their multibillion-dollar relationship with Chrysler, banks have been reluctant to admit even talking to Mr. Kerkorian.

Bankers also said that Chrysler's readiness to alter the loan at the behest of its bank group showed its commitment to maintain a strong working relationship with its banks. …

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