Capital Markets

P&G to Borrow $24 Billion for Buyback

The loan, the biggest since AT&T borrowed $25 billion in 2000, will be used partly to buy back Gillette stock.
Stephen TaubAugust 4, 2005

Procter & Gamble will borrow $24 billion so that it can buy back its shares as well as those of Gillette, the consumer-products giant P&G will acquire this fall, according to a recent company regulatory filing.

The loan is the largest by a U.S. company since AT&T Corp. borrowed $25 billion in 2000, according to The Cincinnati Enquirer. When P&G agreed in January to buy Gillette, it announced plans to repurchase between $18 billion and $22 billion of stock within 12 to 18 months, the newspaper reported.

Citigroup is leading a syndicate of banks that will provide a three-year credit facility. The cost of the facility is a variable-interest rate of 10 basis points over LIBOR. Up to $22 billion will be used for the buyback, with the rest set aside for general corporate purposes.

Beginning in the 2006–07 fiscal year, P&G expects to pay down the $24 billion facility with a combination of cash, commercial paper, and term debt. The new facility will replace the current bridge facility that exists between P&G International and Merrill Lynch.