Capital Markets

Citigroup to Lend Koch $11 Billion

Loan will help finance Georgia-Pacific acquisition.
Stephen TaubNovember 15, 2005

Citigroup is lending Koch Industries $11 billion to help finance its proposed $13.2 billion acquisition of Georgia-Pacific Corp., according to The Financial Times.

The report said the financing is believed to be one of the largest loans on record by a single bank. Furthermore, the $21 billion acquisition — which includes the assumption of debt — is believed to be the largest takeover of a privately held industrial company, added the FT.

The acquisition is not conditional on the financing, so Koch must raise the money whether or not Citigroup comes through with the funds, said the paper.

Koch is the second-largest privately held company, behind Cargill Inc. However, after the deal is completed, Koch will vault ahead of Cargill to become the largest private company in the world.

Citigroup is not likely to put up all of the money once the deal is inked. Rather, it is likely that the financial giant will syndicate the loan to other investors, probably institutions.

In the first nine months of this year, global syndicated loan volume surged 28.3 percent, to $2.3 trillion, compared with $1.9 trillion in the prior year period, according to Thomson Financial. In the third quarter alone, global syndicated lending volume totaled $722.1 billion, up from $626.1 billion in the third quarter of 2004. A major reason for the strong growth is merger activity, noted Thomson officials.

Citigroup ranked second among syndicated loans with a 12.1 percent market share, while JP Morgan ranked first, with a 15.9 percent share. The largest syndicated loan arranged this year was a $24 billion package extended to Procter & Gamble, reported Thomson, followed by a $20 billion syndication put together for GECC Capital Markets Group, and Volkswagen AG’s $15.3 billion loan, said Thomson.

4 Powerful Communication Strategies for Your Next Board Meeting