Hexion, Huntsman inch up; Booz tweaks deal; North American Energy well-received; TriZetto nets interest

By Sara Rosenberg

New York, June 19 - Hexion Specialty Chemicals Inc. and Huntsman Corp.'s bank debt started regaining some ground on the heels of a dramatic fall as investors have had a little bit of time to mull over the news that Hexion is trying to terminate the merger agreement between the two companies.

Over in the primary, Booz Allen Hamilton Inc. came out with a bunch of changes to its credit facility, such as moving funds between the term loan A and the term loan B, reverse flexing pricing on the B and reducing the original issue discounts on the two term loans.

Also in the primary, North American Energy Alliance LLC's credit facility is filling up fast as a number of investor orders came in prior to the deal's official Thursday launch, TriZetto Group Inc. has sparked a good amount of attention ahead of its Friday launch, and Wesco Aircraft Hardware Corp. fully syndicated.

Hexion and Huntsman both saw bank debt levels strengthen during the Thursday session after a pretty big move to the downside late in the day Wednesday on news that the combination of the companies may not take place, according to a trader.

Hexion's strip of institutional bank debt was quoted at 92¼ bid, 93¼ offered, up from 92 bid, 93 offered at the close Wednesday, the trader said. Pre-news on Wednesday, the debt was quoted at 95 bid, 96 offered.

Meanwhile, Huntsman's term loan was quoted at 93¾ bid, 94½ offered, up from 93¼ bid, 94¼ offered at the close Wednesday, the trader continued. Pre-news on Wednesday, the term loan was quoted around the 97½ bid, 98¼ offered area.

Late Wednesday, Hexion announced that it has filed suit in the Delaware Court of Chancery to dismiss its $10.6 billion acquisition agreement with Huntsman, under which Huntsman shareholders would receive $28 per share in cash.

In the suit, Hexion, an Apollo Management LP portfolio company, explained that the capital structure for the combined company is no longer viable because of Huntsman's increased net debt and lower-than-expected earnings, and that these factors show that Huntsman has suffered a material adverse effect as defined in the acquisition agreement.

Hexion said that Huntsman generated a total of about $381 million in adjusted EBITDA in the last quarter of 2007 and the first quarter of 2008 combined, an annualized run rate of $761 million, 41% less than Huntsman's pre-signing forecast for 2008. Huntsman's adjusted earnings per share fell to $0.07 per share in the first quarter of 2008, down 72% from the $0.25 per share earned in the first quarter of 2007.

Based on an opinion from Duff & Phelps LLC, completing the merger on the basis of the capital structure would render the combined company insolvent and as a result, Hexion thinks that the banks will not provide the debt financing for the transaction, and that alternate financing will not be available.

On July 11, 2007, Credit Suisse and Deutsche Bank provided Hexion with a commitment letter for a $9.4 billion credit facility consisting of an $8.4 billion senior secured term loan and a $1 billion revolver.

On Nov. 16, 2007, Hexion entered into a supplemental agreement with the banks to allow $1 billion of the term loan and the $1 billion revolver to be reallocated into a $2 billion asset-based revolver, if necessary.

Credit Suisse and Deutsche Bank also committed to provide $5.95 billion in notes or a bridge loan.

In response to the suit, Peter Huntsman, president and chief executive of Huntsman, said in a news release Thursday, "We believe Hexion and Apollo's actions are inconsistent with the terms of the merger agreement and the obligations to Huntsman and its shareholders. These actions appear to be a blatant attempt to deprive our shareholders of the benefits of the merger agreement that was agreed to nearly a year ago."

The news release went on to say that Huntsman will "vigorously enforce all of its rights under the merger agreement and seek to consummate the merger on the agreed terms."

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

Booz Allen reworks deal

Moving to new deal news, Booz Allen made a round of modifications to its $810 million credit facility (Ba2/BB), including resizing tranches and reworking pricing and original issue discounts, according to a market source.

Under the changes, the seven-year term loan B was upsized to $585 million from $460 million and the term loan A was downsized to $125 million from $250 million due to the fact that there has been so much demand for the B loan during the "pre-marketing" phase of syndication, the source said.

In addition, pricing on the term loan B was lowered to Libor plus 450 basis points from Libor plus 475 bps, while the 3% Libor floor was left intact, the source continued.

Furthermore, the original issue discount on the term loan A and the term loan B was tightened to 98 from 97, the source remarked.

Pricing on the term loan A was left unchanged at Libor plus 400 bps.

No changes were made to the $100 million revolver, which is priced at Libor plus 400 bps as well.

A retail launch for the transaction has not yet taken place, and it is now thought that such a launch is highly unlikely since the deal is already oversubscribed.

Bank of America, Credit Suisse and Lehman Brothers are the joint lead arrangers and joint bookrunners on the deal that will be used to help fund the buyout of Booz Allen Hamilton Inc.'s U.S. government business by Carlyle Group for $2.54 billion.

Other acquisition financing will come from $550 million of eight-year mezzanine debt.

Leverage through the bank deal will be around the low-3s, and total leverage will be around the mid-5s.

The transaction is subject to shareholder and regulatory approvals and other customary closing conditions.

The U.S. government business, based in McLean, Va., has more than 18,000 employees in 80 offices worldwide, generating annual net revenues in excess of $2.7 billion.

North American Energy going well

North American Energy held a bank meeting on Thursday morning to officially kick off syndication on its $545 million credit facility (Ba1/BB+), but even before the launch took place, the transaction was "pretty well subscribed," according to a market source.

The facility consists of a $40 million revolver, an $80 million letter-of-credit facility and a $425 million term loan, with all tranches talked in the Libor plus 275 bps area.

Originally, the term loan was going to be broken down into an $85 million funded piece and a $340 million delayed-draw piece, but since the delayed draw is expected to fund any day now, the whole thing is just being marketed as a single funded loan, the source explained.

Barclays and Union Bank of California are the joint lead arrangers on the deal.

The credit facility is being marketed toward banks, which are purchasing it as a pro rata strip, the source remarked.

Lenders are being offered upfront fees.

Commitments are due during the week of July 7.

Proceeds from the credit facility, along with $325 million of senior unsecured notes, will be used to help back the roughly $1.477 billion acquisition of 1,706 megawatts of generation projects by Industry Funds Management from Consolidated Edison Inc.

The acquisition is being done in two stages. The first stage has already been completed, and the second stage is expected to close shortly.

The projects being acquired are Newington in Newington, N.H., CEEMI in West Springfield and other locations in Massachusetts, Lakewood in Lakewood, N.J., Ocean Peaking Power in Lakewood, N.J., and Rock Springs in Rising Sun, Md.

TriZetto gets early orders

TriZetto Group's credit facility has already received a lot of early interest even though the deal isn't officially launching until a conference call takes place on Friday, according to a market source.

The facility consists of a $50 million six-year revolver talked at Libor plus 400 bps, a $112.5 million six-year term loan A talked at Libor plus 425 bps and a $280 million seven-year term loan B talked at Libor plus 450 bps.

Both the term loan A and the term loan B have a 3% Libor floor and are being offered to investors at an original issue discount of 98.

"Part of the first-lien facilities are circled," the source said, adding that commitments have already come in toward the revolver, term loan A and term loan B tranches.

The source said TriZetto is a public company that already has a lot of investors in its convertibles, "so there's a lot of interest." The company also is a "strong credit in the health care sector, which is a favorable industry right now," the source said in explanation of why syndication is off to such a good start.

RBC Capital Markets is the lead arranger and bookrunner on the $442.5 million senior secured credit facility. GE Capital is the syndication agent.

Proceeds will be used to help fund the acquisition of the company by funds advised by Apax Partners along with BlueCross BlueShield of Tennessee and the Regence Group for $22 per share in cash in a transaction valued at about $1.4 billion.

The financing also includes $187.5 million of private senior unsecured mezzanine notes and more than $891 million of equity comprising more than 60% of the capital structure.

The mezzanine debt has also been well-received as it is already fully circled.

Total leverage is 5.5 times.

The deal was privately rated. Corporate ratings are in the high single-B profile; senior secured ratings have a four-B profile.

The acquisition is subject to customary closing conditions, including shareholder and regulatory approvals.

A shareholder meeting to vote on the buyout will take place on June 30, and the Federal Trade Commission granted early termination of the Hart-Scott-Rodino waiting period in the proposed acquisition in April.

TriZetto is a Newport Beach, Calif., developer, licenser and supporter of proprietary and third-party software products for the health care industry.

Wesco sells out

Wesco's $100 million term loan add-on (B1) has been fully syndicated in the area of initial price talk, according to a market source.

The term loan is priced at Libor plus 225 bps, which is the same as the existing term loan pricing, and the original issue discount was in line with existing trading levels, which is around the 971/2, 98 context, the source said.

Lehman and Bank of America are the lead banks on the deal that was marketed to existing lenders.

The add-on is being done under the accordion feature in the company's existing credit agreement.

Proceeds will be used to fund the acquisition of Airtechnics Inc., a Wichita, Kan., distributor of electrical components to the aerospace industry.

The transaction is expected to close around June 30.

Wesco is a Valencia, Calif., integrated inventory management services provider and distributor of hardware and other components to the aerospace industry.

LandSource being shopped to existing guys

LandSource Communities Development LLC's $1.19 billion debtor-in-possession financing facility is being sold to "existing money guys," so there are currently no plans for a formal bank meeting, a market source told Prospect News on Thursday.

The facility consists of a $135 million revolver priced at Libor plus 600 bps and a $1.055 billion junior secured term loan priced at Libor plus 750 bps.

Barclays is the lead bank on the deal that matures on May 31, 2009.

LandSource is a Los Angeles-based real estate partnership that filed for Chapter 11 earlier this month after being unable to reach an agreement with its lenders on a plan to modify and restructure its debt.

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