Huntsman bond deal resurfaces as lender approval is expected on revised amendment

By Sara Rosenberg

New York, Sept. 9 - Huntsman LLC was the big story of the day as news of a $375 million senior secured notes offering that would be used to pay down bank debt emerged. In order to get the bond deal done, the company must first receive lender approval on a revised amendment to its credit facility.

"We have verbal approvals but tomorrow is the deadline so people are now putting pen to paper," a source close to the deal told Prospect News.

In August, the Salt Lake City petrochemical company began talking to lenders about amending its credit agreement to allow for the issuance of senior secured bonds and modify the application of proceeds definition. The amendment was not immediately approved and has been floating around the market since then.

Most of the terms of the original proposal remained the same except for an increase in amendment fees to 30 basis points from 15 basis points, according to sources.

Furthermore, there was a change in leading banks as Deutsche Bank was previously expected to be sole lead on the bond deal and now a number of banks have been reported as being involved, alleviating some previous concerns that the company would not be able to successfully complete a bond offering. Credit Suisse First Boston, "the biggest bond house in the market is leading the deal," with Deutsche Bank Securities as joint bookrunner, a trader said. Plus, Citigroup, CIBC World Markets, JP Morgan and UBS Investment Bank are all involved as co-managers as well.

Under the original proposal, the company was allowed to issue a minimum of $300 million bonds up to a maximum of $600 million bonds sometime before the amendment expires on Oct. 31. Most market sources seemed to agree that this term did not change, however, 100% confirmation was not attainable prior to press time.

Proceeds from the bond offering would be used to completely repay all outstanding revolver debt, which is about $65 million, and prepay two years of amortization requirements under the company's term loan A, which is approximately $290 million. Therefore, a $365 million bond offering would essentially cover all expenses including fees associated with the transactions.

The bonds would be ranked pari passu with the second lien bank debt.

In order for the use-of-proceeds portion of the amendment to pass, a 50.1% approval vote is needed from term loan B lenders and a 50% approval vote is needed from term loan A and B lenders combined, according to the source.

In order for the bond sale portion of the amendment to pass, 2/3 approval is needed from term loan A and B lenders combined and 50.1% approval is needed from first priority revolver lenders.

Huntsman's bank debt was quoted at 93¾ bid, 94¾ offered, up from 92 bid, 94 offered on Monday and up about 3¾ points on the week as the proposed bond offering was "rumored all yesterday", according to a trader.

Fisher Scientific International Inc.'s new term loan traded actively on Tuesday at par 3/4, up from Monday's par ½ trading level, as many accounts are trying "clean up" following some last minute changes to allocations, according to a trader.

The term loan B add-on, which was originally anticipated to be sized at $250 million "was increased to $375 million and allocated based on that," the trader explained. "And then they reduced it back to $250 million so a lot of accounts are not happy."

Fisher is a Hampton, N.H. manufacturer of scientific instruments, equipment and supplies.

Tyco International Ltd. was also active during market hours with the 2006 paper trading at 99 and 99 1/8, and the 2004 paper trading at 991/2, up from previous trades of 983/4, according to a trader.

"It's active. There are a lot of buyers, not a lot of paper. There's a lot of positive momentum on the name. The revolver is due in 2004. When maturities come close talk of refinancing starts coming up," the trader said.

Tyco is a Bermuda-based diversified manufacturing and service company.

Xerox Corp. was also reported to be higher on Tuesday, basically on market technicals, with the revolver quoted at 92 bid, 93 offered, up from 91¼ bid, 92¼ offered, according to a trader.

"There's no availability. It's coming up because they can't find a seller," a trader said regarding the Stamford, Conn. document company's bank debt.

In follow-up news, Dex Media West LLC closed on its $2.26 billion credit facility (Ba3/BB-/BB-), consisting of a $1.2 billion seven-year term loan B, a $100 million six-year revolver and a $960 million six-year term loan A, all priced at Libor plus 275 basis points.

During the syndication process the pro rata portion of the deal was reverse flexed by 25 basis points and the term loan B was upsized by $150 million to $1.2 billion due to strong demand.

JPMorgan, Bank of America, Deutsche Bank, Wachovia Securities and Lehman Brothers were the lead banks on the deal.

Proceeds were used to help fund the leveraged buyout of the yellow pages directories business by The Carlyle Group and Welsh, Carson, Anderson & Stowe from Qwest Communications Inc. for $7.05 billion.

The buyout involved two stages. In the first stage, which closed Nov. 8, 2002, QwestDex's operations in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota were purchased for $2.75 billion. In this second stage, operations in Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming were purchased for $4.3 billion.

For the acquisition of Dex Media East, approximately $1.79 billion of bank debt was syndicated, consisting of a $700 million term loan B with an interest rate of Libor plus 400 basis points, a $690 million term loan A with an interest rate of Libor plus 300 basis points and a $100 million revolver with an interest rate of Libor plus 300 basis points.

"A little more than 12 months ago we outlined a series of initiatives to strengthen our balance sheet and reduce debt. Our focused and disciplined approach has generated more than $9 billion in cash liquidity and debt reduction since then," said Oren G. Shaffer, Qwest vice chairman and chief financial officer, in a news release. "With the final phase of the QwestDex sale complete, we now have approximately $6 billion in cash after making all currently required debt repayments with the proceeds. This transaction, combined with our demonstrated ability to access the capital markets at favorable terms and generate operating cash flow, gives us a fully funded business plan going forward."

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