Bank of America and Lehman Brothers have underwritten a $500 million bridge loan for L-3 Communications as part of the financing backing the company's $1.13 billion purchase of Aircraft Integration Systems, a division of Raytheon. Robert LaPenta, president and cfo, said in a conference call to analysts that Raytheon will replace the bridge loan with $1 billion in high-yield bonds and equity once it completes an audit, probably in April. The equity offering will be $400-500 million, stated LaPenta. In addition to available cash, an existing $600 million credit facility led by Lehman and B of A will be used to fund the acquisition. The revolver will be also be paid down through future capital market offerings, he added, declining to elaborate. One banker said the bridge loan is unlikely to be syndicated. Officials at B of A and Lehman did not return calls.
The rating agencies are comfortable with the proposed acquisition, LaPenta noted. Standard & Poor's has the company on positive outlook and may go to neutral, and Moody's Investors Service will probably keep L-3 at the same ratings. S&P rates the senior secured credit facilities BB. Moody's rates the L-3 revolver Ba2. Both ratings agencies moved the outlook from positive to stable, but affirmed the ratings.