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As Dell Considers Fortified Offer, Icahn Is Bullish on PCs

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After an encouraging word on Monday from Dell welcoming Carl Icahn's newly fortified bid for the computer maker, the billionaire investor said now is a good time for a contrarian view on PCs.

"There's a lot of drum-beating that the PC business is falling apart," he told CNBC's "Closing Bell."

"But what I've found over the years is that when people tell you it's no good, that's when you buy." He argued that despite the trend toward mobility, a brand like Dell will have staying power in office places.

Dell's special board committee said Monday that it welcomes Icahn's newly fortified proposal, which lines up $5.2 billion in loan commitments to back up his bid for a leveraged recapitalization of the company.

"The Special Committee has reviewed Mr. Icahn's open letter and will be pleased to review any additional information, including financing commitments, that it may receive from him regarding his recapitalization proposal," said a statement from Dell. "The Committee remains committed to achieving the best outcome for all Dell shareholders."

In an open letter to Dell shareholders, Icahn had said that financing commitments included $1.6 billion from Jefferies Finance, which will publicly file the papers after markets close on Monday.

(Read More: Icahn Fires Back at Dell Committee)

"With that we put an end to the unwarranted speculation by Dell that our money would not be available," Icahn said in the letter.

Obtaining the debt financing marks a critical step forward for Icahn's and Southeastern Asset Management's alternative bid for the company. Icahn and Southeastern are asking shareholders to tender 1.1 billion shares at $14 apiece.

The tender offer compares with Michael Dell and Silver Lake Partners' $24.4 billion buyout offer of $13.65 a share—a price Icahn said substantially undervalues the company. The Special Committee had recommended the founder's offer to shareholders.

"I think it's self-evident that we have the superior offer," Icahn told CNBC.

Ichan's effort to compose a superior competing bid had previously been rebuffed by the committee. He asked for a face-to-face meeting with the board to discuss the offer.

A Dell spokesman was not immediately available for comment.

Icahn was expected to have the financing ready by Monday, ahead of an ISS meeting that could take place as early as this week. ISS is a shareholder advisory group that is expected to publish its view on Dell's bid. A July 18 shareholder vote on Dell's take private plan will follow.

Loan Package

The $5.2 billion financing includes a $2.2 billion, six-year term loan B-1 and a $3 billion, 3.5-year term loan B-2, sources told Thomson Reuters.

Pricing on the TLB-1 is set at LIB 400 with a 1 percent Libor floor; pricing on the TLB-2 is set at LIB 350 with a 75 basis-point Libor floor. Both tranches are offered at a discount of 99.5 cents on the dollar and will carry 101 soft call protection for one year.

The pricing, original issue discount and fee structure, as well as low leverage of 1.7 times, made the loan package attractive to investors, said sources evaluating the transaction.

As an unusual perk, lenders will share in the profits if a different but higher bid prevails. Joint lead arrangers will earn 7.5 percent of the difference between the winning bid and Dell's current $13.65 per share offer times the roughly 227 million shares that Icahn and Southeastern jointly own.

The loan also pays a 1.5 percent underwriting fee and a 2 percent arrangement fee. The six-year tranche will have standard 1 percent amortization, while the shorter-dated tranche amortizes at 10 percent per year.

Icahn's proposed tender offer will be financed with $7.5 billion of cash on the balance sheet, the $5.2 billion credit facility and $2.9 billion from the sale of receivables.

If his proposal prevails, the loans would launch to a broader range of institutional investors before Sept. 30, or the three-month commitment period of the $5.2 billion loans, according to sources.

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