Hexion $2.05 billion bank debt to launch Tuesday

By Sara Rosenberg

New York, Oct. 13 - Hexion Specialty Chemicals, Inc. has scheduled a bank meeting for Tuesday to launch its proposed $2.05 billion in new bank debt (Ba3), according to a market source.

Credit Suisse and JPMorgan are the lead banks on the deal.

The debt is comprised of a $2 billion term loan and a $50 million synthetic letter-of- credit facility.

Proceeds from the bank debt, along with $825 million of senior secured debt that Hexion plans on raising, will be used to replace the company's May term loan and synthetic letter-of-credit facilities, fund a $500 million common stock dividend to its shareholders, and fund tender offers for its $300 million of second-priority senior secured floating-rate notes due 2010 and $325 million of 9% second-priority senior secured notes due 2014.

The new bank debt is expected to carry a higher interest rate than the Libor plus 200 basis points spread that the existing term loan and synthetic letter-of-credit facility carry since the "market has widened since May and the company is using proceeds for dividend recap to sponsor," the source said.

Hexion will continue to have access to its current five-year $225 million revolving credit facility.

The tender offers will expire on Nov. 8.

Hexion is a Columbus, Ohio, thermoset resins company.

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