Tin box shifter Michael Dell is having a few problems getting the cash he needs to buy EMC.
The commitment deadline on $10 billion of pro-rata loans in a $45 billion financing package backing computer giant Dell’s EMC purchase has been extended .
One of the problems was the Chinese New Year, which delayed approval of requests from foreign banks’ home offices to participate in the financing.
Asian banks — Chinese and Taiwanese — have balance sheets and an ancillary connection with Dell and EMC, and at the moment they are short on the paperwork.
But this, coupled with sinking oil prices, equity sell-offs and increased dollar funding costs are making it more expensive for some banks to lend and were expected to make Dell’s pro-rata loans a tougher than expected sell.
Some of the people behind the deal are a little worried. The size of the loans was challenging but trying to do it right now makes it harder.
Dell’s $10 billion pro-rata loans include a $3.5 billion three-year Term Loan, a $3.5 billion five-year term loan and a $3 billion five-year revolving credit facility.
The loan package also includes an $8 billion seven-year Term Loan B that will be sold to institutional investors and $25 billion of high-yield bonds, both of which will come to the market before the acquisition is scheduled to close in August.
However the thought is that even if the deal takes longer to sell, Dell’s strong enterprise-oriented business model, the credit quality of the name (expected corporate ratings Ba1/BB+, expected debt ratings Baa3/BBB), and a focus on paying down debt are seen encouraging banks to absorb the pro-rata loans.