Charter Communications Inc. is nearing a deal with banks to borrow money for its Time Warner Cable Inc. bid.
The Wall Street Journal (WSJ) in a report said Charter has held talks with investment banks Bank of America Corp., Barclays PLC and Deutsche Bank AG about a possible multi-billion dollar debt funding. The debt package would underpin an offer for Time Warner, which has a market capitalization of around USD35 billion.
Sources told WSJ that another possible source of cash for the bid are sovereign wealth funds and high-net worth individuals. Securing equity commitments from the said entities could allow Charter to increase the cash component of the deal without incurring too much debt.
News of Charter's intent to acquire Time Warner first surfaced in June. But the difficulty in pulling of such a deal stems largely from Charter's size. With a market value of just USD13 billion, Charter is much smaller than Time Warner, the report said.
Charter is the fourth-largest cable operator in the US, while Time Warner is the second-biggest operator.
Time Warner shares hovered around USD90 a share before the possible merger was floated. At this price, Charter would need to raise at least USD25 billion for the cash component, according to WSJ.
WSJ, citing Barclays estimates, said that the Charter-Time Warner merger could involve an incremental debt component of as much as USD16 billion.
Aside from bank debt, Charter is also expected to utilize existing Liberty Media Corp. and Charter assets. Liberty Media, the company's largest shareholder, backs Charter's bid for Time Warner, WSJ said.
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