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LPC-UPDATE 2-Daimler confirms refinancing $13 bln loan

(adds Daimler confirmation)

By Tessa Walsh

LONDON, Feb 18 (LPC) - DaimlerChrysler AG said on Tuesday it was refinancing loans totalling $13 billion in the largest European syndicated loan of the year to date, confirming an earlier report from banking sources.

The company said it was not planning to draw the facility. Senior bankers said DaimlerChrysler would mandate the loan package for its European and U.S. operations to a group of six banks later this week.

Deutsche Bank, J.P. Morgan, ABN AMRO, Citigroup, Commerzbank and HSBC are expected to arrange the deal, which will consist of a $6 billion one-year tranche, and a $7 billion five-year tranche.

Both tranches will be syndicated in Europe and the United States to relationship banks of the two borrowing entities -- DaimlerChrysler AG and DaimlerChrysler North American Holdings.

The $13 billion facility has not been underwritten, in line with last year's jumbo loans for German utility E.ON and Volkswagen .

The new credit will refinance a maturing $7 billion CP backstop from June 2001 for Daimler's European operation and a $6 billion, five-year U.S. tranche of the company's $17 billion global post-merger facility for June 1999 for DaimlerChrysler North American Holdings.

PRICE POINTS

Despite dwindling loan market liquidity, pricing has stayed static at 35 basis points over LIBOR if drawn and 10 b.p. undrawn on the $6 billion one-year tranche, and 40 b.p. drawn and 17.5 b.p. undrawn on the $7 billion five-year tranche, banking sources said.

The credit will also incur a utilisation fee of 7.5 b.p. if more than 33 percent of the loan is drawn, and 12.5 b.p. if over 66 percent is drawn.

Despite showing an aversion to aggressively-priced loans, which are loss leaders for other capital markets business or ancillary business with the borrower, banks are expected to support Daimler's refinancing, due to a lack of deal flow in the first quarter.

Rated BBB+, Daimler has the benefit of an existing bank group, and enough ancillary business to convince increasingly reluctant banks to commit large chunks of their balance sheets to the deal, bankers say.

"The lesson from E.ON's deal last year is that it takes more time. It's more important than ever to have an extensive preparatory stage. We are talking to banks to make sure they will come in," a banker close to the deal said.

The deal's arrangers also feel that in credit terms, the worst is behind the company. DaimlerChrysler posted an operating profit of 5.8 billion euros for 2002.