Pledge on AT&T offers fees and risks

Wall Street banks are writing some of their biggest checks ever to fund AT&T Inc's takeover of Time Warner Inc as they seek a bonanza of fees. But there's a dose of concern that the $40 billion loan pledge may get caught up in a regulatory impasse.

JPMorgan Chase & Co has pledged $25 billion of the financing, with Bank of America Corp providing the rest, according to a person with knowledge of the matter who asked not to be identified without authorization to speak publicly.

That's believed to be the most JPMorgan has ever promised for a deal, the person said.

The lending commitment gives the banks an advantage on bond offerings that would find willing buyers among yield-starved investors, analysts say.

At the same time the banks face the risk that the deal, along with a chunk of their balance sheets, would be tied up if regulators delay approving it.

"This could be an especially lucrative deal for the banking industry; they're going to make a lot of money if the deal gets done," said Bert Ely, a banking consultant at Ely & Co.

"The numbers on the credit piece look big, but I'm sure the credit risk will be spread widely. The big uncertainty hanging over this will be the battle for regulatory approval and what lender protections are included if the deal fails."

A failed megadeal wouldn't be the first for AT&T. In 2011, the company abandoned its takeover of T-Mobile USA because of regulatory hurdles. JPMorgan had lined up $20 billion to finance that deal.

Taking on commitments to underwrite large deals helps JPMorgan maintain its top position in leading corporate debt deals in the United States.

BLOOMBERG