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Report: Banks Close To Finding Investors For Dell-EMC Acquisition Debt

The institutions that are underwriting the deal have lined up investors for more than $7 billion of the $10 billion in loan exposure they expect to take on as part of the transaction, according to a Thomson Reuters report.

The banks underwriting the more than $45 billion financing package for Dell's acquisition of EMC are reportedly close to finding investors for a large portion of the loans that are expected to be part of the deal.

The banks have lined up investors for more than $7 billion of the $10 billion in loan exposure they expect to take on as part of the transaction, according to a Thomson Reuters report.

Still, banking sources told Thomson Reuters that debt market volatility, slumping equity markets and other economic conditions have contributed to the loans being slow to sell despite healthy demand.

[Related: Dell Edges Closer To Selling Perot Systems, Enters Exclusive Negotiation With NTT]

Stephen Monteros, vice president of sales operations at Sigmanet, an Ontario, Calif.-based Dell partner, told CRN that messages Dell is providing to partners indicates that the merger, slated to close between May and October, could be complete at the early end of that schedule, a prospect he called "great news."

The loans are known as pro-rata loans, which typically include a mix of fixed-term debt and revolving credit. Dell's package includes 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 banks had been expected to commit to the financing by Feb. 10, but pushed that date back as they tried to reduce their exposure.

The Dell deal is being underwritten by JP Morgan, Barclays, Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and RBC Capital.

On Tuesday, the merger cleared a mandatory waiting period under the federal Hart-Scott-Rodino Antitrust Improvement Act of 1976. The proposed $67 billion deal must still win the approval of EMC shareholders and other regulatory clearances.

The acquisition, originally pegged at $67 billion when it was announced in October, would be the largest in the history of the technology industry, and would create an $80 billion global IT industry powerhouse. But the value of the deal has been driven down by VMware's declining share price, which has dropped more than 40 percent in the last four months. EMC owns 80 percent of VMware.

Dell recently pushed back against reports that claimed the acquisition had hit a snag with the group of banks arranging financing. Dell said it expects to take on as much as $49.5 billion in debt to make the deal happen, and plans to begin paying down that debt aggressively in the first 18 to 24 months after the transaction closes.

Part of that debt pay-down includes selling off business units, and Dell is close to unloading its Perot Systems unit. Dell is in an exclusive, 30-day negotiating period with Tokyo-based NTT for Perot, which Dell bought in 2009.

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