Pledge on AT&T of­fers fees and risks


Wall Street banks are writ­ing some of their big­gest checks ever to fund AT&T Inc’s takeover of Time Warner Inc as they seek a bo­nanza of fees. But there’s a dose of con­cern that the $40 bil­lion loan pledge may get caught up in a reg­u­la­tory im­passe.

JPMor­gan Chase & Co has pledged $25 bil­lion of the fi­nanc­ing, with Bank of Amer­ica Corp pro­vid­ing the rest, ac­cord­ing to a per­son with knowl­edge of the mat­ter who asked not to be iden­ti­fied with­out au­tho­riza­tion to speak pub­licly.

That’s be­lieved­to­bethe­most JPMor­gan has ever promised for a deal, the per­son said.

The lend­ing com­mit­ment gives the banks an ad­van­tage on bond of­fer­ings that would find will­ing buy­ers among yield-starved in­vestors, an­a­lysts say.

At the same time the banks face the risk that the deal, along with a chunk of their bal­ance sheets, would be tied up if reg­u­la­tors de­lay ap­prov­ing it.

“This could be an es­pe­cially lu­cra­tive deal for the bank­ing in­dus­try; they’re go­ing to make a lot of money if the deal gets done,” said Bert Ely, a bank­ing con­sul­tant at Ely & Co.

“The numbers on the credit piece look big, but I’msure the credit risk will be spread widely. The big un­cer­tainty hang­ing over this will be the bat­tle for reg­u­la­tory ap­proval and what lender pro­tec­tions are in­cluded if the deal fails.”

A failed megadeal wouldn’t be the first for AT&T. In 2011, the com­pany aban­doned its takeover of T-Mo­bile USA be­cause of reg­u­la­tory hur­dles. JPMor­gan had lined up $20 bil­lion to fi­nance that deal.

Tak­ing on com­mit­ments to un­der­write large deals helps JPMor­gan main­tain its top po­si­tion in lead­ing cor­po­rate debt deals in the United States.

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