Lender Processing cuts pricing; Hexion may go away; Express Energy nets interest; GM, Ford slide

By Sara Rosenberg

New York, June 18 - Lender Processing Services Inc. reduced pricing on its well-oversubscribed term loan B and tightened the original issue discount as well, and Hexion Specialty Chemicals Inc.'s multi-billion dollar credit facility may end up disappearing from the loan pipeline as the company is fighting to terminate its acquisition agreement with Huntsman Corp.

In other news, Express Energy Services' credit facility is already seeing good traction as a bunch of orders came in prior to the deal's launch, and since the launch, investors have continued to express interest. Meanwhile, Getty Images Inc.'s credit facility is already well-oversubscribed.

In the secondary market, General Motors Corp. and Ford Motor Co. both saw a drop in levels after a Deutsche Bank analyst report emerged that painted a negative outlook for the auto sector, and a $348 million BWIC surfaced.

Lender Processing Services came out with some changes to the pricing and original issue discount on its term loan B and firmed the spread on its pro rata tranches at the tight end of talk, according to a buyside source.

The $510 million six-year term loan B is now priced at Libor plus 250 basis points, compared to original talk at launch of Libor plus 275 bps to 300 bps, and the original issue discount is now set at 99, compared to initial talk of 981/2, the source said.

The term loan B includes 101 soft call protection for one year.

The source explained that these revisions were made as result of the deal being an absolute "blowout" with the term loan B four times oversubscribed.

As was previously reported, on Tuesday, the size of the term loan B had been increased by $25 million from $485 million after the company downsized its bond offering to $375 million from $400 million. At that time, it was said that since the term loan B was going very well, investors were focusing on the tight end of the original pricing guidance.

As for the company's $125 million five-year revolver and $700 million five-year term loan A, pricing on these tranches firmed at Libor plus 250 bps, the low end of original talk of Libor plus 250 bps to 275 bps, the source added. Recently, it had been indicated by other sources that the tight end of the initial talk was actually the focus of investors based on the deal's successful syndication progress.

Some positives that sources have listed about the transaction include people knowing the name pretty well, it being a fairly straight forward story, decent leverage and high free cash flow, and lots of existing lenders from the past.

JPMorgan, Bank of America and Wachovia are the lead banks on the $1.335 billion senior secured credit facility (Baa3/BBB).

Proceeds from the credit facility, along with the bond proceeds, will be used to help fund the tax-free spinoff of the company from Fidelity National Information Services Inc.

Lender Processing Services is a provider of integrated data, servicing and technology services to large-scale mortgage lenders.

Hexion could fade from pipeline

Hexion's proposed credit facility could die away as the company has filed suit in the Delaware Court of Chancery to dismiss its $10.6 billion acquisition agreement with Huntsman, according to an 8-K filed with the Securities and Exchange Commission Wednesday.

Hexion said in the suit that it believes 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.

According to Hexion, 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.

While both companies individually are solvent, Hexion believes, based on an opinion from Duff & Phelps LLC, that consummating the merger on the basis of the capital structure would render the combined company insolvent.

In light of this conclusion, 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.

Then, 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.

"While both Hexion and Huntsman can be successful as separate companies, they cannot now support the debt load that was agreed to at the time the transaction was put together," said Craig O. Morrison, Hexion's chairman, president and chief executive officer, in a news release.

"We continue to have enormous respect for Huntsman, the Huntsman family and management team and still believe that a combination of the two companies would offer significant strategic benefits. However, the financing for the acquisition is predicated on a certain level of financial performance and, given the increase in Huntsman's total debt and decrease in earnings, Hexion does not believe that the transaction can be completed," Morrison added in the release.

Under the acquisition agreement, Hexion had agreed to purchase Huntsman for $28.00 per share in cash.

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

Express Energy sees good momentum

Express Energy's credit facility is already off to a good start even though it's only officially been in syndication mode since Tuesday of this week, as just over $100 million in orders came in to the deal before the bank meeting even took place, according to a market source.

And, the initial success is hoped to continue being that the Tuesday bank meeting was really well attended. There were "30 to 40 accounts there and something like 70 people on the phone. [It] seems like there are a lot of interested parties," the source said.

The $360 million credit facility consists of a $35 million five-year revolver and a $325 million five-year first-lien term loan, with both tranches talked at Libor plus 525 bps.

The term loan B is being offered to lenders at an original issue discount of 98 and carries 101 soft call protection for one year.

There is a 3.25% Libor floor on the facility.

The source said the facility has a "good coupon" and the borrower is in a "favored sector at the moment."

"There's a lot of drilling going on and they've had some growth. Leverage is reasonable. It's mid-two's - 2.7 times on a run rate basis. There are definitely reasons why people would be interested in this one," the source added.

Credit Suisse and Lehman are the joint lead arrangers on the deal that will be used to help fund Macquarie's purchase of a majority interest in the company.

Express Energy is a Houston-based provider of oilfield services.

Getty well-received

Getty Images' credit facility has been met with strong investor demand since marketing began, so much so that the term loan is already more than two times oversubscribed, according to a market source.

The $705 million seven-year term loan and the $265 million 40-day delayed-draw, seven-year final maturity, term loan are being talked at Libor plus 425 bps with an original issue discount of 97 and a Libor floor of 3.25%.

The delayed-draw and the funded term loan are basically being marketed as a single $970 million loan.

Getty Images' $1.045 billion senior secured credit facility (BB) also includes a $75 million five-year revolver that is talked at Libor plus 425 bps with a 3.25% Libor floor.

Both the revolver and the delayed-draw term loan have a 50 bps commitment fee.

Financial covenants include a maximum total leverage ratio and a minimum consolidated interest coverage ratio.

Barclays, GE Capital and RBS Securities are the joint bookrunners on the deal, with Barclays and GE acting as co-lead arrangers. GE is the administrative agent.

Proceeds will be used to help fund the buyout of the company by Hellman & Friedman LLC for $34 per share in cash. The transaction is valued at $2.4 billion, including the assumption of existing debt.

Other financing will come from up to $941.3 million in equity.

Completion of the transaction is expected to occur in the second quarter, subject to shareholder approval and other customary closing conditions. The deal is not subject to a financing condition.

A special meeting of shareholders is scheduled to take place on June 20.

Getty Images is a Seattle-based creator and distributor of still imagery, footage and multi-media products, and a provider of other forms of digital content.

GM, Ford trade off

Switching to the secondary, General Motors and Ford both saw term loan levels drop in trading on Wednesday on a Deutsche Bank analyst report that didn't paint a very pretty picture for the companies, according to a trader.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 92 bid, 92¾ offered, down from 93 bid, 94 offered on Tuesday, the trader said.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 85½ bid, 86 offered, down from 85¾ bid, 86½ offered on Tuesday, the trader continued.

"The auto industry got spooked by the Deutsche analyst," the trader added.

In the report, Deutsche analyst Rod Lache lowered his 2008 U.S. light vehicle sales estimate to 14.5 million, 2009 estimate to 15 million and 2010 estimate to 16 million.

Lache also said that June sales levels are plummeting, and that based on a survey, the seasonally adjusted, annualized rate of sales was running near 13 million in the first half of the month.

The projected weakening in sales was attributed to declining consumer traffic and dealers being stuck with an inventory of trucks while consumers want small cars.

Bids due Thursday on BWIC

A $348 million BWIC was put up for sale on Wednesday for which bids are due during the Thursday session, according to a trader.

The BWIC is comprised of about 70 or so names, the trader said, adding that some are the more liquid names and some are off-the-run stuff.

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