Vivendi, owner of the world’s largest music and video-game companies, suffered a setback in its plan to obtain a 1 billion-euro ($1.34 billion) credit line as Europe’s sovereign debt crisis leaves no haven in core countries.Lenders are demanding the Paris-based company pay an interest rate of 90 basis points more than the euro interbank offered rate, above the 75 basis points Vivendi offered, according to three people with knowledge of the talks, who declined to be identified because the terms are private.European companies have raised a record $503.9 billion of loans this year to refinance debt amid growing concern that the cost of funds for all nations will rise further as they struggle to reduce debt loads after Greece, Ireland and Portugal needed to be bailed out. The average interest margin banks charge investment-grade companies in France for loans jumped to 60 basis points from an average of 48.8 in the first eight months of the year, according to data compiled by Bloomberg.“Banks are pretty constrained in their access to liquidity and they are passing that on to their clients,” Roger Francis, a London-based analyst at Mizuho Securities, said Dec.9 in a telephone interview. “They wouldn’t be terribly eager to lend to a big, blue-chip company who wants cheap funding as not only would it push up their capital requirements, it’s not very lucrative lending either.” Jean-Louis Erneux, a spokesman for Vivendi, declined to comment.BNP Paribas SA, Societe Generale SA and Credit Agricole SA, France’s top three banks and Vivendi’s core lenders, had their credit ratings cut by Moody’s Investors Service on Dec.9, which cited funding constraints and deteriorating economic conditions amid Europe’s debt crisis.Moody’s reduced the long-term debt rating for BNP Paribas and Credit Agricole by one level to Aa3, the fourth-highest investment grade. Societe Generale’s rating was lowered to A1, the fifth highest. Moody’s also cut the standalone assessments of financial strength of the three banks, while saying there’s a “very high” chance they will get state support if needed.Vivendi is under pressure to pay a higher interest margin and increased fees to banks after the cost of insuring its debt from default more than doubled to 220 basis points in November from 88 on Jan.24, according to CMA prices.Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.Vivendi is seeking the financing, in part, to replace existing credit facilities, said the people. A 1 billion-euro five-year loan signed last year pays an initial interest margin of 55 basis points, according to data compiled by Bloomberg.The company agreed last month to pay 1.2 billion pounds ($1.88 billion) to acquire the recorded-music assets of EMI Group, home to artists including Coldplay and Katy Parry. The purchase is part of Chief Executive Officer Jean-Bernard Levy’s strategy to move the company towards the music business and to offset slowing growth at mobile-unit SFR. Vivendi’s credit profile may deteriorate next year before improving in 2013, Standard & Poor’s said in a report on Nov.16 after announcement of the EMI deal. Rising Leverage The company’s debt would jump to almost 2.5 times earnings before interest, tax, depreciation and amortization next year from 2.2 at the end of 2011, said S&P, which gives Vivendi a rating of BBB. “Vivendi’s acquisition of EMI’s recorded music business is underpinned by the potential cost synergies but regulatory and execution risks are significant,” Damien Chew, a London based-analyst at Fitch Ratings, said in a Nov.14 report. The purchase “comes at a time when some of its core telecoms businesses are meeting increased competitive pressure and the group’s financial headroom is already limited,” according to Fitch, which gives Vivendi a grade of BBB. Moody’s, which rates the company Baa2, said on Nov.21 the EMI deal will “fully exhaust” Vivendi’s debt capacity after a number of acquisitions this year, including its purchase of a 44 per cent stake in SFR in June.