Allen Gets $1 Billion to Extend Buying Binge

Paul Allen, the co-founder of Microsoft Corp. and owner of Charter Communications Inc., is borrowing $1 billion from Commerzbank and other lenders to help finance more acquisitions, said a person familiar with the transaction.

Allen is using Microsoft shares as collateral for the five-year loan and will pay a floating interest rate of 125 basis points over the London interbank offered rate. That’s equivalent to about 7% today.

Through Vulcan Ventures Inc., Allen has in the last year made acquisitions valued at about $12 billion, building on his vision of creating a so-called wired world in which consumers have access to most entertainment and communications services through the Internet.

Just this month, Vulcan agreed to invest $355 million in Allegiance Telecom Inc., a phone and data service provider, and increase its stake in Replay Networks Inc., which makes an advanced recording device that lets users customize their TV viewing.

It’s not the first time Allen has sought financing from a group of banks. In 1995, he financed a $500-million investment in filmmaker Steven Spielberg’s DreamWorks SKG with a loan arranged by Chemical Bank, now Chase Manhattan Corp.

In May of last year, he borrowed $1 billion in a loan arranged by Chase to invest in Charter Communications Inc., a cable television operator that last month announced plans for a $3.45-billion initial public offering. That loan, too, was backed by Microsoft stock.

Commerzbank is the lead arranger of the current loan, which is expected to be completed in mid-September, the source said. Credit Lyonnais, Bank of Montreal and Paribas are the co-arrangers, agreeing to lend $125 million each.

As of June, Allen owned 135.9 million shares of Microsoft, or 2.47% of the world’s biggest software maker, valued at about $13 billion.

A spokeswoman for Allen declined to comment.