Japanese Banks Extend $2 Billion Loan to Viacom for Paramount Takeover

Japanese banks have agreed to extend a loan package worth $2 billion to Viacom Inc. to finance its takeover of Paramount Communications Inc. in the United States. The loan is part of a $6.8 billion lending package from 27 banks and is seen as a significant investment in the US cable TV business. Analysts believe that Viacom's potential to grow into a leading multi-media service company made the investment attractive to Japanese banks.

Key Takeaways:

• The loan package is worth $2 billion and is the largest loan package extended by Japanese financial institutions to a foreign firm in five years.
• The loan is part of a $6.8 billion lending package from 27 banks.
• Viacom ranks 13th in the number of subscribers to US cable TV business with 1.1 million subscribers.
• Tele-Communications Inc. is the largest US cable firm with 10.25 million subscribers.
• Four Japanese banks, the Bank of Tokyo, the Industrial Bank of Japan, the Long-Term Credit Bank of Japan, and Fuji Bank, will lend $1.04 billion equally, while the rest will lend $190 million each.
• Japanese banks are interested in the US cable TV business due to its potential for big returns, with 60% of US TV households subscribing to a cable service compared to 3% in Japan.

Statistics:

• $2 billion: Amount of loan package extended by Japanese banks to Viacom.
• $6.8 billion: Total lending package from 27 banks.
• $1.04 billion: Amount lent equally by four Japanese banks (Bank of Tokyo, Industrial Bank of Japan, Long-Term Credit Bank of Japan, and Fuji Bank).
• $190 million: Amount lent by each of the remaining banks (Mitsubishi Bank, Sanwa Bank, Sumitomo Bank, Dai- Ichi Kangyo Bank, and Mitsubishi Trust and Banking Corp.).
• 60%: Percentage of US TV households subscribing to a cable service.
• 3%: Percentage of TV households in Japan subscribing to a cable service.

Sources:

• Hisanori Yamada, Bank of Tokyo
• Akio Yoshino, Credit Suisse Economic Research Japan