Debt Financing

Now that the Fed has lowered the interest rate, maybe we could refinance the national debt. HOWARD SCHIFFER Santa Barbara

With Congress and the White House stalemated over the question of debt, it may be reassuring, even instructive, to consider that our nation was embroiled in a crisis over public debt at the very dawn of its history. In fact, the primary motive that brought delegates to the Constitutional Convention of 1787 was to sort out vexing questions of debt and taxes. The debt in question was that owed by the American rebels to the governments of France and Holland, two key allies that had provided funds to support Washington's army.

Facebook Inc. said it had taken out $100 million in debt financing and was looking for a replacement for its chief technology officer. A spokeswoman said the fast-growing social network site based in Palo Alto had taken out a $100-million lease facility from TriplePoint Capital, a specialty finance company that backs venture-funded start-ups. Facebook plans to use the funds entirely for new computers and data centers. The equipment lease financing frees Facebook of the need to raise further venture funding that would dilute existing shares.

A group of money managers within TCW Group Inc. said Tuesday that they reached a deal with the Los Angeles company to split off their $11.5-billion operation. The agreement, which had been expected, will reestablish Crescent Capital Group as a stand-alone investment firm that provides debt financing to public and private companies. Crescent was co-founded in 1991 by Mark Attanasio and two other former executives of junk bond giant Drexel Burnham Lambert, which filed for bankruptcy protection in 1990.

Rbid.com Inc. said Thursday it received a commitment from Marathon Inc. for $210 million of debt financing to be used exclusively for acquisitions. The Irvine developer of marketing and distribution networks said it is seeking strategic opportunities for its growth plan. Marathon is a trading and investment corporation with more than $1.3 billion in assets.

Calpine Corp. has received Bankruptcy Court approval of a proposed $7.6-billion debt financing as it attempts to exit Chapter 11 bankruptcy protection in the coming weeks, the San Jose-based power company said in a regulatory filing. The exit financing would replace Calpine's outstanding $5.0-billion debtor-in-possession credit facility, the company said.

NQL Inc., an Internet networking and consulting services company, said Wednesday that it must consider the sale of its technology unit should it not be able to improve the division's financial condition. The Santa Ana company said in a press release that it must improve the unit's cash position, establish a "significant" alliance or original equipment manufacturer arrangement, or generate sufficient revenue to support the unit's operation.

Affiliated Medical Enterprises of Orange, which borrowed heavily to complete a $100-million acquisition of four hospitals in 1988, confirmed Friday that it will present creditors next week with a plan to restructure its debts. When it purchased the hospitals from American Health Group International in Kirkland, Wash., Affiliated refinanced a hospital it owned in Ojai and arranged $68 million in senior debt financing.

Dear Karen: When financing my business, how do I decide when to get bank loans and other debt financing and when to seek equity from outside investors? Answer : Equity financing involves obtaining funds from outside investors in exchange for an ownership interest in your firm. It is typically used to fund operations during start-up and to attract and retain key employees, said Bob Gellman, director of the CBIZ MHM accounting and consulting firm in San Diego. While equity usually provides money for long-term expenditures, "debt is usually incurred to cover shorter-term operating needs, such as a line of credit to smooth out cash flows or a term note to cover asset acquisitions," Gellman said.

Buyouts are back. A panel of private equity fund managers at the Milken Institute Global Conference in Beverly Hills this week celebrated the comeback of highly leveraged corporate takeovers, which had ground almost to a halt during the financial crisis. "What a difference a year makes," said Leon Black, head of Apollo Management in New York. Black and the other buyout honchos attributed the return of debt-financed acquisitions to the recovery in the credit markets and the overall economy.

Dear Karen: When financing my business, how do I decide when to get bank loans and other debt financing and when to seek equity from outside investors? Answer : Equity financing involves obtaining funds from outside investors in exchange for an ownership interest in your firm. It is typically used to fund operations during start-up and to attract and retain key employees, said Bob Gellman, director of the CBIZ MHM accounting and consulting firm in San Diego. While equity usually provides money for long-term expenditures, "debt is usually incurred to cover shorter-term operating needs, such as a line of credit to smooth out cash flows or a term note to cover asset acquisitions," Gellman said.

CBS Corp. may face an $893-million funding gap for bonds maturing next year even after slashing its dividend 81% to save cash, a Barclays Capital credit analyst said. CBS may have to sell new debt to help pay off $1.4 billion of bonds due in July 2010, Scott Shiffman wrote in a note to clients. The company may be less likely to draw on its $3-billion revolving credit facility, which will probably have to be replaced before it expires at the end of 2010, he said.

Everyone in Hollywood knows that one of the world's wealthiest filmmakers, Steven Spielberg, hates to spend his own money making movies. But Spielberg and India's Reliance Big Entertainment -- his equity partner-in-waiting -- are expected to write a hefty check to Paramount Pictures next month to buy 17 projects to jump-start their new independent studio. Facing a due date of Jan. 15, Spielberg and Reliance will have to pay DreamWorks' former owner anywhere from $25 million to $35 million for the projects, depending upon commitments to screenwriters.

Chaos in the money markets gave Microsoft Corp. an opening Monday to announce that it would take on debt for the first time, launch a new $40-billion stock buyback plan and raise its dividend. The moves indicate that for all the credit problems plaguing the financial sector, cash-laden technology companies with good credit ratings are still borrowing money on favorable terms and otherwise enjoying flexibility. The largest information-technology company, Hewlett-Packard Co.

Facebook Inc. said it had taken out $100 million in debt financing and was looking for a replacement for its chief technology officer. A spokeswoman said the fast-growing social network site based in Palo Alto had taken out a $100-million lease facility from TriplePoint Capital, a specialty finance company that backs venture-funded start-ups. Facebook plans to use the funds entirely for new computers and data centers. The equipment lease financing frees Facebook of the need to raise further venture funding that would dilute existing shares.

U.S. Treasury to Borrow $38.5 Billion Next Week: The quarterly debt financing is to include funds to restart the stalled savings and loan cleanup. The government plans to sell $16.5 billion in 3-year notes on Tuesday, $11 billion in 10-year notes on Wednesday and $11 billion in 30-year bonds on Thursday. The three-day total would surpass the previous record of $38 billion, set in November, 1991, and would be used to raise about $11.8 billion in cash and redeem $26.

Calpine Corp. has received Bankruptcy Court approval of a proposed $7.6-billion debt financing as it attempts to exit Chapter 11 bankruptcy protection in the coming weeks, the San Jose-based power company said in a regulatory filing. The exit financing would replace Calpine's outstanding $5.0-billion debtor-in-possession credit facility, the company said.

A consortium of private investors who won last month's bidding for Los Angeles-based Univision Communications Inc. has lined up $10.25 billion in debt financing, making the acquisition a highly leveraged transaction. Chairman A. Jerrold Perenchio and Univision's board last month accepted the $12.3-billion offer from the group, which consists of Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, Thomas H. Lee Partners and Los Angeles billionaire Haim Saban.