HCL TIES UP £400-M LOAN FOR AXON OFFER AT 6.5%

Moumita Bakshi Chatterjee, New Delhi, September 29, 2008
The Hindu Business Line

HCL Technologies, which rivaled Infosys’ bid for Axon Group, has tied up the £400-million loan component to fund its offer, at an attractive interest rate of about 6.5 percent per annum, based on the current dollar LIBOR rate.

According to sources, the borrowing has been structured in such a way that the loan attracts a dollar LIBOR instead of pound.

“The loan carries an option for HCL Technologies to draw down in equivalent of dollars. This is a commercially evaluated decision. Given the borrowing cost of 6.5 percent per annum compared to our treasury yield of about 10 percent on our own funds, it becomes clear as to why HCL Technologies decided to maximise loan component for funding the acquisition,” sources pointed out.

Last week, HCL Technologies announced a cash offer of 650 pence a share for the UK-based SAP consulting company valuing it at £441.1 million, over eight percent higher than a rival £407 million offer made by Bangalore-based Infosys Technologies.

HCL has inked an ‘inducement fee contract’ with Axon, which entitles it to get one percent of the bid amount if it failed to acquire the consultancy firm..