Banks Prep Mammoth Weyerhaeuser Loan; Bond Offering To Follow
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Banks Prep Mammoth Weyerhaeuser Loan; Bond Offering To Follow

Morgan Stanley and J.P. Morgan are set to syndicate an $8 billion loan to finance Weyerhaeuser Co.'s planned $6.11 billion all-cash acquisition of Willamette Industries. Bank of Tokyo Mitsubishi and Deutsche Bank are co-underwriters on the loan, which is split equally between a bridge to a bond offering and a commercial paper backstop, said bankers. The bonds are likely to be underwritten by the lead lenders, said one banker, who was unable to provide the date of a bank meeting or likely issuance of the bonds. The deal is awaiting final approval from Willamette's board, which is scheduled to meet in two weeks. Analysts and bankers following the company also envision equity offerings and asset sales.

Morgan Stanley was Weyerhaeuser's adviser on the Willamette deal, while J.P. Morgan benefits from Chase Manhattan Bank's longstanding relationship with the buyer, according to bankers. The loan, which will also refinance existing debt, had to be upped considerably to accommodate a much-sweetened hostile bid. William Stivers, cfo of Weyerhaeuser and Bruce Amundson, spokesman, did not return calls.

Washington-based Weyerhaeuser launched the bid back in November 2000 after Willamette's board rejected an unsolicited offer of $43 per share, worth about $4.7 billion. After several offers, the agreed price is now $55.5 per share, which will lead to a more than doubling of Weyerhaeuser's debt. The higher price is despite a weak market for forest products, but one banker said the acquisition price is fair based on EBITDA levels for Willamette, and is certainly lower than 1994 and 1999 valuations.

The credit ratings for Weyerhaeuser are A from Fitch and A- from Standard & Poor's. "The ratings are certain to be downgraded," said Dennis Ruggles," a Fitch analyst. S&P predicts a move to BBB based on the higher financial risk of the credit profile of the combined businesses. Officials at the lead banks either did not return calls or declined comment.

 

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