Merrill & Bear Stearns Land Cablevision Loan Deal

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Merrill Lynch and Bear Stearns have each committed to provide the family that controls Cablevision with one-half of the $12.4 billion of debt financing the acquisition of the cable company, according to a letter filed with the SEC yesterday.
Of course, it’s not quite accurate to say that the money is being provided to the Dolan family. The actual borrowers are Cablevision and a series of shell holding companies who secure the loans with Cablevision stock and assets. That’s leveraged buyout magic—buying a company with money you don’t have and collateralizing the loans with the company you don’t own.
The competition to be the lead lenders on the deal was most likely intense, with at least a handful of banks submitting letters to the Dolans. The Cablevision assets are very valuable as collateral and the fees attached to loans of this size most likely quite large. One surprising aspect of the winning Merrill-Bear Stearns letter, however, is that it retains a full-throated due diligence “out”—a provision allowing the banks to refuse to lend money if their due diligence investigation turns up serious problems with the company. In heavily sought after deals, this language is often watered down.
Unfortunately, the real red-meat of the deal is not disclosed. We’re talking, of course, about the bank fees and interest rates. These don’t get disclosed because they are not considered relevant to public investors in a going private transaction. Since the public shareholders are being bought out, they don’t have any economic interest in knowing what fees and interest rates the private company will be paying. So the fee letter gets kept under wraps.
Project Central Park Credit Facilities Commitment Letter [SEC]
Dolans Obtain $12.4 Billion for Cablevision Buyout [Bloomberg]

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