TORONTO (Reuters) - Teck Cominco TCKb.TO moved to quell concerns about its $13.7 billion takeover of Fording Canadian Coal Trust FDG_u.TO on Tuesday, saying it believed financing for the deal was solid and that it had options if one of its lenders withdrew.
“We are working hard to complete the financing by September 30, and we look forward to closing the deal,” Teck Chief Executive Don Lindsay said on a webcast to address investors who have grown jittery about the $9.8 billion Teck is borrowing to finance the deal.
“We have no indications (the financing) will not conclude on schedule.”
Separately, Fording spokesman Colin Petryk said Teck has assured the trust that the turmoil in financial markets has not affected its ability to secure financing for the deal.
However, shares of both companies fell on Tuesday, and Fording’s units stayed well below the offer price, suggesting concerns remain.
Teck offered $14.1 billion in cash and stock for Fording in July. A decline in Teck’s shares since then has pulled the deal’s value down to around $13.7 billion.
Fording units had fallen as much as 24 percent since Friday amid a growing financial crisis in the United States.
In particular, investors worries about the role of Merrill Lynch MER.N, which is one of six banks in the lending syndicate. The troubled U.S. bank has agreed to be taken over by Bank of America Corp (BAC.N).
Merrill Lynch did not return requests for comment.
But Lindsay said it had encountered no changes in lending conditions in its recent discussions with the banks, and said that even if one bank were to withdraw others would readily make up the shortfall.
“If a circumstance should occur where a bank for whatever reason chooses not to meet its obligations, I think we have several alternatives for financing, including the current banks that are in,” he said.
The assurances appeared to provide some solace for Fording investors, as the stock rocketed up as much as 15 percent from its early-session lows.
By mid-afternoon, it had retrenched somewhat, and was down 2.6 percent at $75.95 on the New York Stock Exchange, well below the offer price of $90.05 a share -- consisting of $82 in cash and 0.245 of a Teck share.
Shares of Teck were down 7.7 percent at $31.85 in New York.
“We were always of the opinion that the transaction would go through, and I think that view was reiterated,” said Mike Plaster, an analyst who covers Fording for Salman Partners.
Lindsay said Teck will finance the deal with a bridge loan, then will wait until credit markets improve to shift most of that to a bank facility and bond issuances.
The deal would see Teck raise its stake in the Elk Valley partnership, the world’s No. 2 producer of coal used in steelmaking.
Fording currently owns 60 percent of Elk Valley, while Teck owns 40 percent, and also about 20 percent of Fording.
Teck has said it is in talks to sell its current Fording stake to help fund the cash portion of the Takeover.
Reporting by Cameron French; editing by Rob Wilson