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Written by: Staff

LONDON, Mar 24 (Reuters) The 8 billion euro syndicated loan backing Mittal Steel's bid for Arcelor has been launched to a wider syndication, bankers close to the deal said on Friday.

Arrangers Citigroup (books), Goldman Sachs (books), Societe Generale (books), Commerzbank, CSFB and HSBC have launched the deal to around 20 of Mittal Steel's relationship banks, which have been invited to sub-underwrite the loan.

The deal consists of a 5 billion euro acquisition facility which funds the cash portion of the bid, and a 3 billion euro refinancing facility which repays a $3.5 billion 364-day bridge loan of December 2005 that financed Mittal Steel's acquisition of Ukrainian steelmaker Kryvorizhstal.

Both facilities are being syndicated together and have identical maturity splits, with one-third of the debt in a one-year tranche, one-third in a three-year tranche and one-third in a five-year tranche, bankers said.

The interest margins are also the same on both facilities and are 57.5 basis points on the one-year tranche, 65 b.p. on the three-year tranche and 70 b.p. on the five-year tranche, they added.

RATING These opening margins are based on a blended triple B rating, bankers said. Mittal Steel is rated BBB+ by Standard&Poor's, Baa3 by Moody's and BBB by Fitch. All of the ratings agencies have said they may cut the company's ratings after the Arcelor acquisition, however.

The deal offers lenders an acquisition premium -- Mittal Steel's debut loan in April 2005 had average pricing of 38.5 bps, which compares favourably with the current pricing of 57.5 b.p. to 70 b.p., bankers said.

Mittal Steel's relationships banks have been invited to sub-underwrite 600 million euros each with a view to holding 400 million euros after syndication. This will earn a fee of 40 b.p.

Concerns over a possible downgrade are expected to be offset by Mittal's strong post-acquisition profile, bankers said.

The combined company would have 10 per cent of the global market and EBITDA of around 13 billion euros, which will allow it to manage the peaks and troughs of a cyclical business better, they added.

The loan may be syndicated further once the result of the bid is known, bankers said. Mittal Steel's bid has met fierce opposition from target Arcelor, which says the unsolicited share-and-cash offer undervalues the company.

The bid, which values Arcelor at 19.9 billion euros, requires regulatory approval, and Arcelor's shareholders are expected to take around two months to decide whether to accept.

Mittal Steel has voiced concerns about plans to spoil the bid, which include a proposed amendment to Luxembourg's takeover law, but is confident of gaining enough shareholder support to complete the takeover.


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