Brocade has secured a US$1.1 billion (NZ$1.7 billion) loan to fund its acquisition of Foundry Networks, despite a tightening of credit markets amid the Wall Street meltdown.
The loan came through even as the Dow Jones Industrial Average fell more than 500 points (5.11 percent), and many technology stocks dropped even more steeply. Among those hardest hit were Sun Microsystems, Nortel Networks, Amazon.com and Qwest Communications International, all down more than 10%. Apple shares went down 9.25% while Google suffered less damage, falling 6.79%.
Brocade's planned acquisition of Foundry, announced in July, will expand the storage-area-networking pioneer into the Ethernet LAN business for an end-to-end set of offerings. Brocade said in July it would exchange a combination of stock and cash for each Foundry share, partially funding the deal with about US$1.5 billion of debt financing from Bank of America and Morgan Stanley.
Such arrangements are common, but by the time Brocade held an analyst meeting in mid-September to lay out its plans for Foundry, Wall Street investment banks were already teetering and stocks were on their way down. Financial analysts at the event repeatedly asked Brocade CEO Michael Klayko about the financing of the deal, and he said each time that he was confident it would come through.
Brocade has now confirmed it got a US$1.1 billion term loan facility and a US$125 million revolving credit facility. Bank of America led the funding, joined by Banc of America Securities, Morgan Stanley Senior Funding and other institutions. Brocade also said it expects to raise as much as US$400 million in additional financing. Brocade stuck by its forecast that the acquisition would be completed by the end of the year.