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. (Brian Ach/WireImage.com)
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.
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.