Magazine article American Banker

BankAmerica, Chase Launch $12 Billion of Defense Loans

Magazine article American Banker

BankAmerica, Chase Launch $12 Billion of Defense Loans

Article excerpt

Chase Manhattan Corp. and BankAmerica Corp. launched two blockbuster defense-industry loans on Friday, providing $12 billion in fresh assets to a market starved for deals.

Banks seemed eager to participate in the two investment-grade loans, which include a $7 billion credit for Raytheon Co. and a $5 billion loan for Hughes Aircraft Co. Several banks committed to the deals as early as Thursday night, lenders said.

"People have known these deals have been in the works for a while, and in this market they do their homework early," one lender said.

Still, some lending experts said the market may find it difficult to digest $12 billion in debt for a single sector. Banks prefer to spread their credit exposure among many industries.

But the loan syndications market has been relatively quiet in 1997, compared to last year's record-setting volume. And $5 billion worth of the new loans are set to mature within a year, limiting the time that banks will have these defense assets on their books.

"Based on the terms and conditions and timing, we think it'll be very well received, there's no doubt about that," said Bruce Ling, managing director and the head of syndications for Credit Suisse First Boston, documentation agent on the Raytheon loan."It 's a very receptive time."

Canadian Imperial Bank of Commerce is serving as documentation agent on the Raytheon transaction.

Lexington, Mass.-based Raytheon will use its new facility to refinance and expand a $3 billion loan and to purchase Texas Instruments' defense electronics business. Arlington, Va.-based Hughes Aircraft, meanwhile, will use its new loan to finance part of its tax-free spinoff from General Motors Corp.

The Hughes loan is contingent on the successful sale of the company to Raytheon. Bankers stressed, however, that the Hughes facility distinct from the Raytheon loan.

"The reason they are being launched on the same day is that everyone knows about the two deals," said a defense lender. …

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