Goldman Sachs, Merrill Lynch, Morgan Stanley and Lehman Brothers, have all signed up as retail participants in a $425 million two-year term loan for AES. Power sector financiers say it highly unusual to see so many bulge bracket firms sign up to a single loan facility.
An official at one of the two lead arrangers, Banc One Capital Markets and Union Bank of California, says signing up such blue chip firms is testament to AES' strong banking relationships. "AES throws a lot of capital markets business their way. Now it's leveraging the relationship." He adds that the banks came in at the $15-25 million level.
Some rival lenders give a darker interpretation. They say it also suggests that AES has had to pull out all the stops to get the deal done. One lender notes that the dramatic near 50% slump in its stock price recently may have left some of AES' traditional lenders unwilling to take on more credit exposure. The lead arranger denies this. He says that underwriters always target banks that are most likely to join the syndicate.
AES will use the corporate loan to fund its equity investment in various projects. The loan is priced at 23/ 8% over LIBOR. Calls to AES were not returned and officials at the investment banks either did not return calls or declined to comment.