AES, Huntsmen earnings haunt company debt; SPX plans amendment to credit facility

By Carlise Newman

Chicago, July 30 - Earnings were still the focus in bank loan trading Wednesday, as AES Corp. reported a wide second-quarter loss and Huntsmen's bank debt continued to drop after reporting weak earnings Tuesday.

AES said its net loss stretched to $129 million from $115 million a year earlier. Excluding charges, the Arlington, Va.-based company reported a profit of 11 cents per share, just below the analysts' average estimate of 12 cents.

Revenue rose 10% to $2.2 billion.

AES' bank debt was seen dropping a point to 98 bid, 99 offered, a trader said.

AES said in the release it has refinanced or raised about $5 billion of debt in the past nine months. It now has about $1 billion of cash on hand.

The company said it expects to show $1.5 billion of consolidated net cash for 2003, of which $737 million was generated during the first six months of the year.

"Earnings, earnings, it was all about that today. But it was something. AES passed the desk and then Huntsmen, and then a few other things from early in the week, varying kinds of things," a trader said.

Meanwhile on Tuesday the combined Huntsmen companies reported earnings of $135.1 million, compared to $227.4 million for the same period one year ago, and first-quarter 2003 EBITDA of $106.6 million.

Huntsmen's bank debt was quoted at 94¼ bid, 95¾ offered, according to a trader, a slide of ¾ of a point.

"It opened at 96 on Monday, so it's a somewhat significant drop," he said.

The combined companies include HMP Equity Holdings Corp. and its operating subsidiaries Huntsman LLC and Huntsman International Holdings LLC.

Huntsman LLC posted second-quarter EBITDA of $46.6 million, compared to $79.2 million for the same period one year ago and $31.9 million in the first quarter 2003. Huntsman International reported second-quarter EBITDA of $88.5 million, compared to $148.2 million in the second quarter of 2002 and $74.7 in the first quarter 2003.

Elsewhere, Reddy Ice Group Inc.'s new term loan B in the secondary bank loan market was "still quite active" after breaking last Thursday, moving up ½ point 101 ½ bid.

Credit Suisse First Boston, Bear Stearns and CIBC are leading the deal, which is being used to help fund the leveraged buyout of the Dallas packaged ice company by Trimaran Capital Partners and Bear Stearns.

In other news, SPX Corp. said it is in discussions to amend its senior secured credit facility with the goal of lowering the interest rate on one or more tranches of the term loans (see story elsewhere in this issue).

The amendment may also modify covenants including those covering restricted payments.

A syndicate source said the amendment is still at a very early stage and the lead bank on the loan J.P. Morgan Chase has not started work yet.

Meanwhile, Inergy LP said it closed on a $200 million senior secured bank credit facility, consisting of a $150 million revolver for acquisitions and a $50 million working capital revolver line of credit, maturing in July 2006, and amounts outstanding will bear interest at variable interest rates.

The bank syndicate providing the credit facilities includes the company's current banks: Wachovia Bank, Fleet National Bank, Bank of Oklahoma, U.S. Bank, Wells Fargo Bank Texas and Team Bank; and six new banks: LaSalle Bank, Bank One, Union Bank of California, Bank of America, First National Bank of Kansas and Raymond James Bank.

Funds will be used primarily for future acquisitions and working capital and to refinance existing debt.

The Kansas City, Mo.-based propane company has $20 million outstanding under the bank credit facility.

On the distressed side, WorldCom Inc. was "buzzing but not in a good way," a trader said. The company has been facing opposition from its rivals, which have accused WorldCom of rerouting telephone calls through Canada as a way to avoid tariffs owed to other telecom companies for use of their networks.

The rerouting practice is said to have been going on for 10 years but the charges only surfaced in the last 10 weeks when a former WorldCom employee alerted the FBI about a company project known as "Canadian Gateway," according to various news reports, starting with one in The New York Times on Sunday.

The bank debt was quoted at 27 bid, 29 offered, a two-point drop from Monday, a trader said.

"We saw it trade at about 28 late Tuesday, and it opened lower and fell further today," he added.

Rerouting calls through Canada allegedly allowed WorldCom to send them back into the U.S. on AT&T's network. Therefore AT&T would pay carrying charges that should have been paid by WorldCom.

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