Japanese Banks Said to Be Close to Funding RJR Deal
Trading in RJR Nabisco Inc. was hectic Friday as investors scrambled for shares on a news report that 10 Japanese banks were about to lend Kohlberg Kravis Roberts & Co. $5.15 billion to help pay for the food and tobacco firm.
The stock topped the most actives on the New York Stock Exchange, rising $1.50 to $93.125 on top of Thursday’s $1 advance. The price still remains below the $109-a-share bid in cash and securities offered by KKR. Almost 4.5 million shares were traded by late afternoon.
U.S. banks are also expected to furnish lending for the leveraged buyout of RJR, which is the most expensive takeover in U.S. corporate history.
Japan’s Kyodo News Service, quoting unidentified sources in the financial industry, reported that the biggest banking names in Japan were lining up to help finance the $25-billion takeover. Some $13.7 billion of the purchase price is needed from banks.
Some banks have been cautious about committing to KKR because of the large size of the loans and possible Congressional action to tighten rules on leveraged buyouts.
The deadline for deciding on participation is Jan. 18, but banks can commit as early as Friday.
Despite the concerns, a majority of banks are expected to support the deal because of the attractive terms, Kyodo said. KKR is offering an interest rate about 2.5 percentage points above the London interbank offered rate, which is the global version of the U.S. prime.
The 3-month offered rate Friday was quoted at 9.43%. With the premium, KKR would be paying nearly 12%, which is considered an appropriate rate for speculative, or “junk bond” financing. The U.S. prime is currently at 10.5%.
KKR has been so eager to have Japanese banks chip in that KKR partner Henry Kravis met representatives of Japanese banks in Tokyo last month.
Dai-Ichi Kangyo Bank Ltd., Fuji Bank Ltd., Sanwa Bank Ltd. and Long-Term Credit Bank of Japan plan to lend $600 million each, Kyodo quoted sources as saying.
Mitsubishi Bank Ltd., Sumitomo Bank Ltd., Industrial Bank of Japan Ltd. and Nippon Credit Bank Ltd. will each lend $500 million, the Kyodo report said. Tokai Bank Ltd. will lend $400 million and Mitsui Trust & Banking Co. Ltd. $350 million, Kyodo said.