Hertz, Huntsman slide with numbers; Accuride inches up; JDA purchase of i2 hits more roadblocks

By Sara Rosenberg

New York, Nov. 6 - Hertz Global Holdings Inc.'s term loan headed lower in trading on Thursday after the company released earnings and said that it will not be able to reach its previous full-year estimates, and Huntsman Corp. fell after it, too, came out with financials, although the continued problems with the acquisition by Hexion Specialty Chemicals Inc. may be more too blame.

Also in trading, Accuride Corp.'s term loan was a touch stronger despite seemingly negative earnings as the company's results were a bit better than analyst estimates, the cash market in general was quiet with a weaker tone to it as many investors are staying on the sidelines, and LCDX 10 headed down.

Moving away from the secondary market, JDA Software Group Inc. did not get its wish as i2 Technologies Inc. held its Thursday meeting of stockholders to vote on the companies' acquisition agreement, even though JDA wanted the meeting delayed as a result of problems with the credit facility.

Hertz softens

Hertz's term loan traded down during Thursday's market hours following the company's third-quarter earnings announcement that included a warning that previously provided full-year estimates will not be met, according to a trader.

The term loan was quoted at 71 bid, 73½ offered, down from 72½ bid, 75 offered, the trader said.

On Wednesday night, Hertz came out with third-quarter results that included net income of $17.7 million, or $0.05 per share on a diluted basis, compared to net income of $162.7 million, or $0.50 per share on a diluted basis, for the third quarter of 2007.

Revenues for the quarter were $2.42 billion, a decrease of 1.1% from $2.45 billion in the prior year.

Corporate EBITDA for the third quarter was $386.7 million, a decrease of 30.3% from $555.1 million in 2007.

Net cash provided by operating activities was a use of $261.7 million in the quarter, compared to positive cash flow of $9 million last year.

The company said that its liquidity position remains strong and that there is sufficient debt capacity to meet fleet debt amortizations through mid-2010.

Hertz to miss expectations

Hertz also said on Thursday that it expects to fall short of its previous full-year guidance as a result of reduced demand, lower pricing and residual market conditions.

In addition, the company suspended giving specific earnings guidance on individual financial metrics, with the plan being to resume guidance when the economy and market conditions stabilize.

The company does still expects to generate a profit on an adjusted pre-tax and corporate EBITDA basis in its car and equipment rental businesses, and generate positive levered and total net cash flow for the full year.

Hertz is a Park Ridge, N.J.-based car and equipment rental business.

Huntsman drops

Huntsman's term loan also weakened in trading on the back of third-quarter numbers coming out, but the problems with the acquisition by Hexion may be more of a factor in the movement, according to a trader.

The term loan was quoted at 79 bid, 81 offered, down from Wednesday's levels of 81½ bid, 83½ offered, the trader said.

For the quarter, Huntsman said that net loss was $20.2 million, or $0.09 per diluted share, compared to a net loss of $150 million, or $0.68 loss per diluted share, for the same period in 2007.

Adjusted net loss from continuing operations for the quarter was $1.9 million, or $0.01 per diluted share, compared to adjusted net income of $80.0 million, or $0.34 per diluted share, last year.

Revenues for the quarter were $2.7305 billion, an increase of 13% compared to $2.4238 billion for the third quarter of 2007.

And, adjusted EBITDA from continuing operations for the quarter was $193.9 million, compared to $240.2 million last year.

Huntsman warns on Hexion difficulties

Also on Thursday, Huntsman warned in a 10-Q filing that its acquisition by Hexion may not be completed and it's possible that Huntsman may not get the termination fee and damages if the transaction falls apart.

As was previously reported, Hexion was going to complete its buyout of Huntsman in late October, but Deutsche Bank and Credit Suisse refused to fund their debt commitments for the deal. Hexion sued the banks seeking specific performance of the banks' obligations under the commitment letter. A trial has been set for Jan. 8.

In the 10-Q, Huntsman said that if the banks don't honor their commitment, Hexion will have to seek other financing to complete the transaction, which financing may not be available.

In addition, Huntsman explained that there's a risk that if the deal isn't completed, Hexion may not have access to the funds needed to pay the $325 million termination fee.

Furthermore, Huntsman would likely seek damages from Hexion if the transaction doesn't close, but the company warned that the court may not award it damages in an amount sufficient to compensate for its loss and Hexion may not be able to pay the damages.

Huntsman is a Salt Lake City-based manufacturer of differentiated chemicals and pigments. Hexion is a Columbus, Ohio-based thermoset resins company.

Accuride rises

Accuride was one name that did move a little higher after earnings were released, and even though the numbers weren't great, they did beat analyst estimates.

The term loan was quoted at 68 bid, 71 offered, up from previous levels of 67½ bid, 70½ offered, the trader said.

For the third quarter, Accuride reported a net loss of $201.2 million, or $5.67 per diluted share, compared with a net loss of $1.2 million, or $0.03 per diluted share, in the prior year.

Sales for the quarter were $239.5 million, compared with $220.6 million last year.

The company had an operating loss of $215.1 million in the third quarter, due to $212.2 million in goodwill and other intangible impairment and $11.5 million in restructuring charges.

And, adjusted EBITDA was $20.1 million, or 8.4% of sales, for the quarter, compared to adjusted EBITDA of $13.7 million, or 6.2% of sales, for the same quarter of 2007.

Accuride lowers outlook

Accuride also said on Thursday that its 2009 outlook expectations have been lowered with an industry rebound not expected until the second half of the year at the earliest.

In addition, the company announced that it may not be able to comply with financial covenants under its credit facility at the end of the 2009 first quarter, and therefore, the situation is being monitored closely and alternatives to address compliance concerns are being explored.

As for 2008, based upon projected North American Class 8 production of about 200,000 units for 2008 and Class 5-7 production of about 180,000, the company expects its 2008 adjusted EBITDA to be in the range of $80 to $90 million.

Accuride is an Evansville, Ind.-based manufacturer and supplier of commercial vehicle components.

Cash, LCDX softer

The cash market in general and LCDX 10 were both weaker on the day as equities dropped, according to a trader.

"Light volume today, think it will be a trend you'll see," the trader said about the cash market. "Lot of people want to see what policies Obama will put in effect before putting money to work. Also, hedge funds are being cautious so they have money for redemptions - keep money in cash just in case."

The trader went on to say that overall, the cash market was down about a quarter to a half a point on the day.

As for LCDX 10, levels were quoted around 86 bid, 86.50 offered, down from Wednesday's levels of 87.60 bid, 87.85 offered, the trader remarked.

Nasdaq closed down 72.94 points, or 4.34%, Dow Jones Industrial Average closed down 443.48 points, or 4.85%, S&P 500 closed down 47.89 points, or 5.03%, and NYSE closed down 344.77 points, or 5.74%.

i2 denies JDA adjournment request

In other news, i2 Technologies Inc. went ahead with its previously scheduled Thursday special meeting of stockholders regarding its acquisition by JDA Software, despite a request from JDA to delay the meeting so that a lower purchase price could be worked out as a result of financing problems.

In a news release Thursday, i2 said that it held the meeting "in order to fulfill its commitments under the merger agreement, which include holding a stockholders' meeting, and to preserve its rights under the merger agreement, including its right to pursue a termination fee from JDA under certain specified circumstances."

At the meeting on Thursday, i2 stockholders did approve the acquisition agreement.

On Tuesday, JDA had asked i2 adjourn its shareholder meeting to allow the two companies to negotiate a reduced purchase price from the original roughly $346 million cash price, since, as a result of the adverse effect of the continuing credit crisis, available credit terms would result in unacceptable risks and costs to the combined company.

i2 said that its board of directors considered the request and, based on a number of factors, including that JDA's obligation to complete the merger is not subject to any financing contingency, does not believe delaying the meeting is in the best interests its stockholders.

Under the current purchase agreement, i2's common stock was going to be converted into the right to receive $14.86 per share in cash and each issued and outstanding share of i2's series B convertible preferred stock was going to be converted into the right to receive roughly $1,095 per share in cash plus all accrued and unpaid dividends.

JDA plans to seek more time for financing

As was previously reported, upon making the request for the adjournment of the i2 meeting, JDA had said that if the meeting went on as planned, it was going to exercise its discretionary right under the acquisition agreement to take up to 60 days in order to continue to attempt to arrange acceptable debt financing.

"If i2 proceeds with its shareholder meeting as scheduled on Nov. 6, 2008 and obtains a favorable vote for the current transaction, we believe it would not be possible to then negotiate an appropriate purchase price reduction and obtain shareholder approval of a revised transaction prior to the termination of our financing commitment on Nov. 26, 2008," JDA said in a letter to i2 that was filed with the Securities and Exchange Commission on Thursday

"Accordingly, if i2 holds its shareholder meeting on Nov. 6, JDA will be forced to exercise its discretionary right under section 1.2 of the agreement and plan of merger to use up to 60 days to continue to attempt to arrange the debt financing," the filing added.

The transaction was previously expected to close in the fourth quarter, subject to completion of financing, i2 stockholder approval, the amendment of i2's convertible note indenture, expiration or termination of the applicable Hart-Scott-Rodino waiting periods and regulatory and other customary conditions. Successful syndication of the debt was not a condition of the financing.

In September, the companies announced that they received early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

JDA credit facility structure

JDA Software's not yet successfully syndicated $450 million five-year senior secured credit facility consists of a $250 million first-out term loan talked at Libor plus 600 basis points, a $175 million first-loss term loan talked at Libor plus 950 bps and a $25 million revolver.

All tranches have a 3.25% Libor floor, the two terms loans are both being offered at an original issue discount of 95, the first-out loan has 101 call protection, and the first-loss term loan is non-callable for one year, then at 103, 102, 101.

Originally, the facility was launched as a $25 million revolver talked at Libor plus 575 bps with a 3.25% Libor floor, and a $425 million term loan talked at Libor plus 575 bps with a 3.25% Libor floor, an original issue discount of 97 and 101 call protection against voluntary prepayments for one year - but revisions were made in late October in the hopes of attracting investors.

In the letter to i2 requesting the shareholder meeting adjournment, JDA said: "Our lenders have recently notified us that they have revised the terms on which they intend to provide financing for this transaction. These revised terms, in our judgment, create unacceptable risks and costs to the combined company," the Thursday 8-K filing said.

Credit Suisse and Wachovia are the joint lead arrangers and joint bookrunners on the deal, with Credit Suisse the agent and Wachovia the syndication agent. Wells Fargo Foothill is part of the syndicate as well.

JDA is a Scottsdale, Ariz.-based provider of supply and demand chain requirement software products. i2 Technologies is a Dallas-based provider of supply chain management products.

Liberty Tire closes on downsized deal

Liberty Tire Services LLC closed on its $110 million credit facility, which was downsized from $130.5 million, during syndication, according to a market source.

The final structure on the facility is a $20 million revolver, a $70 million term loan, down from $80.5 million, and a $20 million acquisition loan, down from $30 million, the source said.

The funded amount from the downsized tranches was shifted to a second-lien term loan, the source remarked.

Details on pricing are not being given out, the source added.

CIT acted as the lead bank on the deal that was used to help fund the buyout of the company by American Securities from Park Avenue Equity Partners and the acquisition by Liberty Tire of GreenMan Technologies' tire recycling business.

Liberty Tire is a Pittsburgh-based operator of used tire collection, processing and disposal operations.

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