Hexion rises on numbers; Claire's up with preliminary results; Landry's sets amendment fee

By Sara Rosenberg

New York, Nov. 16 - Hexion Specialty Chemicals Inc.'s strip of institutional bank debt headed higher by a few points on Monday as the company released third-quarter results that showed an improvement in net income, operating income and revenues on a year-over-year basis.

Also in the secondary, Claire's Stores Inc.'s term loan B was better following the company's announcement of unaudited financial results for the third quarter.

In other news, the consent fee for Landry's Restaurants Inc.'s amendment and extension of its existing senior secured credit facility surfaced now that the transaction is very close to being finalized, and Alliance HealthCare Services Inc. released price talk on its credit facility as the deal was launched to investors.

Hexion strengthens

Hexion's strip of institutional bank debt saw positive momentum during the trading session after the company came out with earnings for the third quarter that were considered good across the board by investors, according to traders.

The strip of debt was quoted by one trader at 81¾ bid, 82¾ offered, up from 79¼ bid, 80¼ offered, and by a second trader at 81 bid, 82 offered, up from 80¼ bid, 81¼ offered.

For the third quarter, the company reported net income of $53 million versus a net loss of $76 million in the prior year period.

Operating income for the quarter was $70 million, compared to $7 million last year.

Revenues for the quarter were $1.08 billion, compared to $1.61 billion during the third quarter of 2008.

Segment EBITDA totaled $128 million in the third quarter, compared to $130 million during the previous year.

In addition, for the LTM period ended Sept. 30, adjusted EBITDA was $520 million and the ratio of adjusted EBITDA to fixed charges was 2.71.

Hexion liquidity adequate

Hexion also said on Monday that it expects to have adequate liquidity to fund its ongoing operations and cash debt service obligations for the foreseeable future, including its obligation to redeem $34 million in face value of Industrial Revenue Bonds in the fourth quarter.

The company's obligations are expected to be funded from cash flows provided by operating activities, amounts available for borrowings under credit facilities and amounts available from its parent.

At Sept. 30, Hexion had $3.507 billion of debt, and $403 million in liquidity, including $139 million of unrestricted cash and cash equivalents, $218 million of borrowings available under its senior secured revolver, and $46 million of borrowings available under additional credit facilities.

Looking forward, the company said that it will continue to focus aggressively on cash management.

During the first nine months of 2009, the company generated cash flow from operations of $311 million.

Hexion is a Columbus, Ohio-based thermoset resins company.

Claire's better on numbers

Claire's Stores' term loan B gained some ground on Monday as the company released unaudited financial results for the third quarter, according to a trader.

The term loan B was quoted at 79 bid, 80 offered, up from 78 bid, 79 offered, the trader said.

For the third quarter, the company expects to report operating income of $31 million to $33 million, compared to $16 million in the prior year.

Net sales for the quarter are expected at $324 million, a decrease of $9 million, or 2.6%, compared to the 2008 third quarter.

And, adjusted EBITDA for the quarter is expected to be between $52 million and $54 million, compared to $45 million last year.

At Oct. 31, cash and cash equivalents were $165 million, and $194 million continued to be drawn on the company's revolver.

Claire's Stores is a Pembroke Pines, Fla.-based specialty retailer of value-priced jewelry and accessories for girls and young women.

Landry's fee emerges

In more loan happenings, Landry's has reached a decision on the consent fee for its amendment and extension transaction, offering lenders 1½ points for signatures, whereas, previously, the fee was labeled as still to be determined, according to a market source.

In addition, the source said that the amendment and extension is just about finalized.

Under the proposal, the company will extend the maturities on its revolver and term loan to four years from the effective date, that being November 2013 if the amendment closes this month, from May 2011.

Pricing on the extended term loan and revolver debt will be Libor plus 600 basis points with a 2% Libor floor.

Also as part of the amendment, the revolver will be increased to $75 million from $50 million, while the term loan is basically just rolling over, so it will be roughly $160 million, and covenants and baskets will be revised to provide more flexibility.

Wells Fargo and Jefferies are the lead banks on the deal that was talked to lenders on an individual basis.

Landry's also selling notes

On top of the amend and extend, Landry's is planning to price $390 million of senior secured notes on Tuesday.

Proceeds from the notes will be used to help fund the acquisition of Landry's by Tilman J. Fertitta, chairman, chief executive officer and president of Landry's, for $14.75 per share in cash.

The refinancing of Landry's credit facility and high-yield bonds needs to take place in order for the buyout to be completed.

Closing on the proposed acquisition is expected to take place in the first half of 2010, subject to the debt refinancing, stockholder approval and regulatory approvals.

On Friday, Pershing Square Capital Management LP, a holder of around 9.9% of Landry's shares said in an SC 13D filed with the Securities and Exchange Commission that it plans to oppose the buyout by Fertitta.

Landry's is a Houston-based restaurant company.

Alliance floats talk

Alliance HealthCare came out with price talk on its $450 million 61/2-year term loan of Libor plus 350 bps with a 2% Libor floor and an original issue discount of 98, according to a market source.

Deutsche Bank, Barclays and Morgan Stanley are the lead banks on the deal that was launched with a bank meeting on Monday, with Deutsche the left lead.

The $570 million senior secured credit facility (Ba3) also includes a $120 million five-year revolver.

Proceeds, along with a $200 million senior notes offering and cash on hand, will be used to help fund the purchase of the company's $300 million of 7¼% senior subordinated notes due 2012 and to refinance its existing credit facility.

Alliance HealthCare is a Newport Beach, Calif.-based provider of outpatient diagnostic imaging and radiation oncology services.

IMAX closes

IMAX Corp. closed on its $75 million four-year senior secured credit facility, consisting of a $40 million revolver and a $35 million term loan, according to a news release.

Wachovia acted as the lead bank on the deal, with Export Development Canada a participant.

Borrowings under the credit facility will bear interest at variable rates based on Libor or Wachovia's prime rate plus variable margins, under which applicable interest rates currently range from 300 bps to 400 bps.

Covenants include a ratio of funded debt to EBITDA of not more than 2:1 through Dec. 31, 2010 and 1.75:1 thereafter, and a fixed-charge coverage ratio of not less than 1.1:1.0.

Proceeds are being used to finance its future growth and working capital requirements and refinance an existing facility that matures in October 2010.

IMAX is a Mississauga, Ont.-based entertainment technology company.

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