Earthbound Farm firms pricing; Hexion, Huntsman fall as merger terminated; LCDX softens

By Sara Rosenberg

New York, Dec. 15 - In primary market news Monday, Earthbound Farm finalized pricing on its credit facility as the deal is fully syndicated and currently in the documentation process.

Meanwhile, over in the secondary market, Hexion Specialty Chemicals Inc. and Huntsman Corp. both saw their term loan levels slide as the merger agreement between the companies was canceled.

And, although a settlement agreement was reached between Hexion and Huntsman to end all litigation related to the merger, Huntsman is continuing its suit against the banks that had provided the debt commitment letter for the deal.

In other happenings, LCDX 10 headed lower in sympathy with equities, while cash was unchanged to slightly weaker in a relatively quiet session.

Earthbound sets pricing

Earthbound Farm firmed up pricing on its $135 million credit facility, which is fully syndicated, according to a market source.

Both the $100 million term loan and a $35 million revolver ended up at Libor plus 500 basis points with an original issue discount of 98, the source said.

Earlier on in syndication, the term loan was downsized from $150 million as a result of a decrease in the purchase price and an increase in the amount of mezzanine debt being used for the transaction.

RBC Capital Markets is the lead bank on the deal that will be used to fund the leveraged buyout of the company by Lindsey Goldberg.

Closing is expected to take place in the new year, the source added.

Earthbound Farm is a San Juan Bautista, Calif.-based organic produce company.

Hexion, Huntsman drop on merger news

Moving to the secondary market, Hexion and Huntsman both experienced a weakening in their term loan debt as the companies announced that their merger agreement was officially pulled, according to a trader.

On July 12, 2007, Hexion had agreed to acquire Huntsman in an all-cash transaction valued at $10.6 billion, including the assumption of debt. Huntsman shareholders approved the deal in October 2007.

As part of the termination of the agreement, all buying and selling participants agreed to end the litigation that resulted from various obstacles that came into play along the way.

In response to the announcement, Hexion's term loan was quoted at 41 bid, 46 offered, down from Friday's levels of 47 bid, 50 offered, the trader said.

And, Huntsman's term loan was quoted at 50 bid, 55 offered, down from Friday's levels of 59 bid, 62 offered, the trader added.

Hexion to pay settlement

In connection with the end of the pending purchase, Apollo Management LP, the owner of Hexion, agreed to pay Huntsman $425 million to settle all claims and will purchase $250 million principal amount of Huntsman senior convertible notes.

Also, Hexion will pay Huntsman the $325 million merger agreement termination fee and has financial commitments from Credit Suisse and Deutsche Bank to fund this fee.

Separately, Apollo has agreed to make a $200 million investment in Hexion that will be used for general business purposes.

Hexion bank deal was already unlikely

The massive credit facility that was going to fund Hexion's acquisition of Huntsman was already considered by the market as probably gone since, a few weeks ago, the court decided not to extend the financing commitment from the banks past the Nov. 1 expiration date.

Under the original commitment, Credit Suisse and Deutsche Bank had agreed to provide Hexion with a $9.4 billion credit facility, consisting of an $8.4 billion term loan and $1 billion revolver, or a $7.4 billion term loan and $2 billion asset-based revolver.

Hexion's purchase of Huntsman was previously hoped to close in October, but the closing was delayed as the banks refused to fund the debt financing, claiming that the solvency opinion of American Appraisal Associates and the solvency certificate of Huntsman's chief financial officer did not meet the condition of the commitment letter.

Huntsman case against banks not settled

Not included in the Hexion/Huntsman settlement is Huntsman's suit against Credit Suisse and Deutsche Bank that claims that the banks conspired with Apollo and tortiously interfered with Huntsman's prior merger agreement with Basell, as well as with the later merger agreement with Hexion.

A jury trial on those claims currently is set to begin on May 11.

As part of the settlement agreement with Hexion, Apollo and its principals have agreed to fully cooperate in connection with Huntsman's litigation against the banks.

"This is a significant settlement for our company and its shareholders, but we must continue to pursue our multi-billion dollar Texas case against Credit Suisse and Deutsche Bank for the harm they have caused. We remain focused on preparing for our May jury trial against the banks," said Jon M. Huntsman, founder and executive chairman, in a news release.

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

LCDX slides

Also in trading, LCDX 10 softened on Monday as stocks weakened a little bit and the cash market was unchanged to maybe down a quarter to a half a point with light volume, according to a trader.

The index went out around 71.75 bid, 72.25 offered, down from Friday's levels of 72.25 bid, 72.75 offered, the trader said.

Nasdaq closed down 32.38 points, or 2.10%, Dow Jones Industrial Average closed down 65.15 points, or 0.75%, S&P 500 closed down 11.16 points, or 1.27%, and NYSE closed down 46.06 points, 0.83%.

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