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Banks balk at Icahn’s Dell deal

By
Dan Primack
Dan Primack
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By
Dan Primack
Dan Primack
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July 2, 2013, 8:44 PM ET
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FORTUNE — I believe that Carl Icahn sincerely wants to buy Dell Inc. Maybe not always, but by now he really has talked himself into the idea that this is a great company beset by lousy management.

At the same time, I don’t believe he has a shot at it.

My last slivers of doubt were wiped out this morning, when Icahn disclosed that he had secured $5.2 billion in bank debt to help finance his proposed $14 per share tender offer for the company. Or, more specifically, when Icahn disclosed that he personally was financing more than half of that $5.2 billion. Seems most lenders didn’t want anything to do with his Dell (DELL) deal.

According to a proxy statement, Icahn affiliates would put up 65.8% of the $5.2 billion package — or $3.42 billion. But it actually comes in at only $3.1 billion because of a series of back-to-back commitment letters where other buyers would take around $320 million off Icahn’s hands.

When first discussing the deal publicly back in May, here is what Icahn told CNBC:

“I personally have said that i would be good for over $2 billion if needed. So that brings it down to only $3.2 billion, and we got $1.6 billion already from Jeffries without going anywhere yet.”

So Icahn ultimately had to put in $1.1 billion more than he had originally projected, after Jefferies proved unable to syndicate out the $1.6 billion it hadn’t committed off its own balance sheet (after two months of work!).

To be fair, Icahn was discussing a recap rather than a tender during his CNBC interview — in part because he thought Dell’s board would only consider the former to be a “superior offer” — but this still represents a pretty broad rejection of his plan.

Remember that Icahn only gets Dell if (a) Shareholders reject the $13.65 per share buyout offer from Michael Dell and Silver Lake, and (b) If Dell’s board subsequently votes in Icahn’s slate of directors who then would engage the tender (a vote in which Michael Dell could participate).

And if lenders are saying no, why does he think equity holders will be any different. Particularly given that the bondholders would have greater protections? Moreover, there’s a high likelihood that the stock is now largely in the hands of arbs who are content with the $13.65 per share price, and have no interest in a longer-term hold.

Icahn today argued that his ability to put together the $5.2 billion package should be enough for Dell’s board to realize he’s serious. Unfortunately for Icahn, it also makes everyone realize that he’s got a losing hand.

Sign up for my daily email newsletter on deals and deal-makers: GetTermSheet.com

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