Huntsman seeking amendment to allow for bond sale and repayment of bank debt

By Sara Rosenberg

New York, Aug. 12 - Huntsman International LLC is currently talking to lenders about amending its credit agreement to allow for the issuance of senior secured bonds and modify the application of proceeds definition.

If approved, the company could issue a minimum of $300 million of bonds to a maximum of $600 million bonds sometime before the amendment expires on Oct. 31. Currently, the bond offering is anticipated to be sized at $365 million with Deutsche Bank slated to lead the deal, according to a market source.

Proceeds from the bond offering would be used to completely repay all outstanding revolver debt, which is about $65 million, and prepay two years of amortization requirements under the company's term loan A, which is approximately $290 million. Therefore, a $365 million bond offering would essentially cover all expenses including fees associated with the transactions.

The bonds would be ranked pari passu with the second lien bank debt.

Timing on the bond offering has not been decided as of yet. First, the company and its lead bank are focusing on approval. Once that is obtained, market conditions will be studied and the proper time to bring the deal will be chosen. However, there is a good chance that the deal would wait until after Labor Day, when activity is expected to pick up again.

In order for the use of proceeds portion of the amendment to pass, a 50.1% approval vote is needed from term loan B lenders and a 50% approval vote is needed from term loan A and B lenders, according to the source.

In order for the bond sale portion of the amendment to pass, two-thirds approval is needed from term loan A and B lenders combined and 50.1% approval is needed from first priority revolver lenders.

So far, the amendment seems to be moving along relatively well, according to the source. Some pluses going for the proposal are that new debt will be layered in where existing debt was, so seniority is not compromised, and the desire by term loan A lenders to get repaid at par as compared to holding on to the bank paper that is currently trading around 93.

Furthermore, all term loan A lenders are term loan B lenders, meaning that if an investor owns 3% of the A loan, he also owns 3% of the B loan. The A tranche has a lower interest rate than the B tranche so if the amendment passes and a portion of the A loan is repaid, the investor's blended coupon spread is higher, according to a second market source.

Revolver lenders are not expected to oppose the amendment since they have first security on the collateral package.

Lender responses on the Salt Lake City chemical company's proposal are due on Wednesday.

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