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Delay in
lining up $5.2B for Dell has Carl on hot seat
By MARK DECAMBRE AND JOSH KOSMAN
Last Updated: 12:46 AM, June 14, 2013
Posted: 12:03 AM, June 14, 2013
Dude, where’s your PC
financing!?!
Carl Icahn’s much
ballyhooed recapitalization of Dell Inc. is hitting a snag, fueling
questions about the financier’s ability to pull together the $5.2
billion he needs to fund a $12-a-share dividend.
Icahn and his partner,
Southeastern Asset Management, have been scrambling to arrange a
financing package over the past few weeks via Jefferies in order to
offer a rival plan to the $13.65-a-share offer from private equity
firm Silver Lake and founder Michael Dell.
Icahn and SAM had planned
to complete their financing by last Friday, according to sources who
had spoken to them.
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Carl
Icahn appears to have his hands full trying to raise $5.2
billion to fund his Dell recapitalization plan. Critics of the
effort say Icahn is running out of time.
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The billionaire investor
told potential lenders that the financing has been delayed, in part,
because he is retooling it to address a $3.9 billion funding gap that
Dell’s special committee highlighted last week, sources said..
Icahn could start
presenting lenders with the revised package sometime next week,
sources said.
But time may not be on
Icahn’s side as Dell shareholders are slated to vote on the Silver
Lake-led $24 billion proposal on July 18.
Meanwhile, lenders have to
decide whether they like Icahn’s offer of a piece of the profits from
the deal instead of guaranteed underwriting fees, one lender noted.
A call to Icahn was not
returned.
Since early February, when
Silver Lake made its bid public, founder Michael Dell and Icahn have
been locked in a cantankerous battle over the future of the world’s
No. 3 PC maker.
Dell’s special committee
has publicly shared its misgivings about Icahn’s ability to deliver a
legitimate alternative to Silver Lake’s proposal — including pointing
out flaws in his funding.
Underwriting the $5.2
billion loan could be challenging for Icahn’s bankers because Dell is
an “extremely difficult” company to underwrite, other Wall Street
sources noted.
Indeed, Dell’s special
committee paints a particularly grim picture for the company’s
business in a recent investor presentation. Free cash, it said,
dropped 43 percent from $5.2 billion last year to $3 billion so far
this year.
Earnings per share are also
expected to plunge by roughly 40 percent, to $1.25 in 2014 from $2.10
this year.
Making matters worse
interest rates have edged higher in recent weeks making obtaining a
loan that much more expensive, one lender following the deal notes.
Meanwhile, other sources
close to the Dell committee have quietly griped that Icahn’s plan is
focused on enriching himself and not about helping long-term
shareholders strike a richer buyout offer.
Some shareholders are
holding out hope that Icahn’s cage-rattling may result in a revised
offer of $14 or better.
Lately, Icahn, who has
openly discussed removing Michael Dell as CEO if his plan succeeds,
has been warming to the idea of keeping him on board on the chance his
restructuring plan is successful.
mark.decambre@nypost.com
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