Portion of Bid-Wanted trades; Hexion/Huntsman meet bank resistance; Ashland still working on loan

By Sara Rosenberg

New York, Oct. 28 - Some of the close to billion dollar Bid-Wanted-In-Competition sold on Tuesday and details emerged on who was running the auction process and where the portfolio was coming from.

In other news, Hexion Specialty Chemicals Inc. revealed that the banks on the debt financing for the purchase of Huntsman Corp. have refused to fund their commitments, delaying the close of the transaction.

Also on the new deal front, Ashland Inc. said that it is continuing to work with its lenders on its in market acquisition financing credit facility, and the hope is to close the deal around mid next month.

Less than half of Bid-Wanted sells

Bids were due on Tuesday for the $969 million Bid-Wanted-In-Competition that was announced late last week, and although several bids were received on a good amount of the portfolio, only a small percentage of it traded, according to a trader.

Also, it surfaced during the session that Barclays ran the auction for Black Diamond.

The trader said that bids were received on about 75% of the portfolio, but only 30% of it actually sold.

When asked why only a portion of what was bid on was sold, the trader responded, "Maybe bids weren't that good."

As was previously reported, the Bid-Wanted-In-Competition was comprised of somewhere around 135 names.

Hexion, Huntsman merger delayed as banks won't fund

Hexion's acquisition of Huntsman was hoped to be completed on Tuesday; however, the closing was unable to take place since the lead banks on the debt financing for the deal are claiming that they should not have to fund their commitments, according to an 8-K filed with the Securities and Exchange Commission.

Hexion said in the filing that it received correspondence late in the evening on Monday from counsel to affiliates of Credit Suisse and Deutsche Bank stating that the banks do not believe that the solvency opinion of American Appraisal Associates and the solvency certificate of Huntsman's chief financial officer meet the condition of the commitment letter.

Hexion went on to say that it planned to meet and work with the banks to complete the deal on Tuesday, but if the commitments weren't funded, the company would "vigorously enforce all of its contractual rights."

Hexion financing details

Under the original commitment, Credit Suisse and Deutsche Bank had agreed to provide Hexion with a $9.4 billion credit facility, according to previous filings with the SEC.

Those filings said that the facility would consist of an $8.4 billion term loan and $1 billion revolver, or a $7.4 billion term loan and $2 billion asset-based revolver.

However, it was unclear prior to press time whether this is actually what the banks are being asked to fund.

Over the past few weeks, there have been some new financing announced for the acquisition, such as a $540 million capital contribution from Apollo Management LP.

On July 12, 2007, Hexion 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.

Hexion, Huntsman hold steady in trading

Despite the new acquisition obstacle, both Hexion and Huntsman saw their term loans hang in pretty well in trading on Tuesday, according to a trader.

Hexion's term loan was quoted at 63 bid, 66 offered, unchanged to maybe down a point, the trader said.

And, Huntsman's term loan was quoted at 86 bid, 88 offered, unchanged on the day, the trader continued.

"Maybe people think it's still going to get done," the trader added.

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

Cash, LCDX inch up

The loan cash market in general and LCDX 10 were both better during the trading session probably in sympathy with stocks, according to a trader.

The cash market was up roughly half a point, although in pretty light volume as many market players spent their time focused on the Bid-Wanted-In-Competition, the trader remarked.

And, the index went out around 85.5 bid, 86.25 offered, up from Monday's levels of 83.75 bid, 84.5 offered, the trader added.

Nasdaq closed up 143.57 points, or 9.53%, Dow Jones Industrial Average closed up 889.35 points, or 10.8%, S&P 500 closed up 91.59 points, or 10.7%, and NYSE closed up 536.92 points, or 10.33%.

Ashland plugging away

Moving back to primary news, Ashland announced on Tuesday that it continues to work with its banks on the structure and terms of its credit facility so as to be able to get the deal done in the near future, according to a 425 filed with the SEC.

Bank of America and Scotia Capital are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent.

Proceeds from the facility, along with $750 million of senior unsecured notes, will be used to help fund the acquisition of Hercules Inc. for $18.60 per share in cash and 0.093 of a share of Ashland common stock. The total transaction value is about $3.3 billion, including $0.7 billion of net assumed debt.

All regulatory approvals for the transaction have been received and Hercules shareholders are scheduled to vote on the deal on Nov. 5. The anticipated closing date is Nov. 13.

Ashland credit facility terms

As launched, the Ashland $1.75 billion senior secured credit facility (Ba1/BBB-) consists of a $500 million five-year revolver talked at Libor plus 325 basis points, a $500 million five-year term loan talked at Libor plus 325 bps, and a $750 million seven-year term loan B talked at Libor plus 350 bps with a 3% Libor floor and an original issue discount of 98.

There have been no official changes made to the credit facility since launch other than the commitment deadline being indefinitely extended, a market source told Prospect News on Tuesday.

Under the original commitment letter, the term loan A was sized at $600 million and the term loan B was sized at $850 million. However, as was allowed under the letter, the company decided to replace $100 million of the term loan A and $100 million of the term loan B with an accounts receivable securitization facility, prior to launch.

Also, the commitment letter had outlined pricing on the revolver and term loan A as Libor plus 275 bps, and pricing on the term loan B as Libor plus 325 bps.

Financial covenants under the facility include a maximum leverage ratio and a minimum fixed-charge coverage ratio.

Ashland is a Covington, Ky., chemical company. Hercules is a Wilmington, Del., manufacturer and marketer of specialty chemicals.

Apria closes

The Blackstone Group completed its acquisition of Apria Healthcare Group Inc. for a total purchase price of $1.7 billion, inclusive of retired debt and associated transaction costs, according to a news release.

To help fund the transaction, Apria got a new $150 million senior secured asset-based revolving priced at Libor plus 275 bps.

Bank of America, Wachovia and Barclays acted as the lead banks on the deal.

Borrowings under the revolver can be used for working capital and general corporate purposes.

At close about $30 million was drawn under the revolver.

Apria is a Lake Forest, Calif., home health care services company.

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