Hexion rises on amendment; Supervalu A loan up with numbers; Spansion sets price talk

By Sara Rosenberg

New York, Jan. 12 - Hexion Specialty Chemicals Inc.'s strip of C-1 and C-2 bank debt continued to head higher on Tuesday as the company launched an amendment that would extend maturities and permit the sale of bonds.

Also in trading, Supervalu Inc.'s term loan A was stronger following the company's release of quarterly results that showed an improvement in net earnings on a year-over-year basis, and MetroPCS Communications Inc.'s term loan held steady despite the company's decline in subscriber growth during the fourth quarter.

Over in the primary market, Spansion Inc. came out with pricing guidance on its exit financing term loan as the deal was presented to lenders early on in the day.

Hexion better as amendment launches

Hexion's strip of C-1 and C-2 bank debt saw an improvement during the trading session helped by the company's launch of an amend and extend transaction, according to traders.

The strip of bank debt was quoted by one trader at 93¼ bid, 93¾ offered, up from 92 bid, 93 offered and by a second trader at 93¼ bid, 94½ offered, up from 92 bid, 93 offered.

During the previous session, the strip of debt had moved up from around 90½ bid, 91½ offered on chatter that the company would be holding a lender call on Tuesday.

The talk proved correct as, on Tuesday, Hexion announced that it is looking to amend its senior secured credit facility to allow for the extension of term loan and revolver maturities.

The extended term loan would mature on May 5, 2015 and pricing on the loan would be higher than current pricing.

Hexion gets orders for revolver

On top of the term loan extension, Hexion is also working on extending its revolver and has received about $175 million of commitments from revolver lenders for extended revolver loans due May 5, 2013.

The new revolver would take effect upon the May 31, 2011 maturity of the existing revolver.

The $175 million in orders includes the $147 million of commitments that the company already obtained and announced in December 2009.

Pricing on the extended revolver is Libor plus 450 basis points and extending lenders are being offered a 200 bps upfront fee as well as a 200 bps ticking fee.

The company said in an 8-K filing on Tuesday that it plans to pursue additional commitments for the new revolver.

Hexion to sell notes

In addition, Hexion's amendment would permit the company to issue $700 million of senior secured notes due 2018.

The amendment would also permit the company to issue additional senior notes or loans in the future as long as an agreed amount of proceeds from the new debt are used to prepay term loans and/or revolver loans at par.

Also, the company would be able to issue additional debt, including junior or unsecured debt, in an amount not to exceed the amount available under the accordion feature, and would be able to obtain certain types of receivables financing.

As part of the amendment, the accordion feature would be reset to $200 million.

Lastly, the amendment would revise some covenants contained in the credit agreement.

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

Supervalu gains with earnings

Supervalu's term loan A was better on Tuesday after the company revealed numbers for the third fiscal quarter of 2010, while the term loan B was unchanged, according to traders.

The term loan A was quoted at 98¼ bid, 99¼ offered, up from 98 bid, 99 offered, one trader remarked.

Meanwhile, the term loan B was quoted at 97¼ bid, 98¼ offered by one trader and at 97 bid, 98 offered by a second trader, with both traders saying the paper was flat from previous levels.

For the third fiscal quarter of 2010, the company reported net earnings of $109 million, or $0.51 per diluted share, compared to a loss of $2.9 billion, or $13.95 per diluted share, in the same period last year.

Earnings from the prior year included non-cash goodwill and intangible asset impairment charges of $3.3 billion pre-tax or $3.1 billion after-tax, or $14.57 per diluted share. Without these charges, third-quarter fiscal 2009 net earnings were $132 million, or $0.62 per diluted share.

And, net sales for the quarter were $9.2 billion, down from $10.2 billion in the fiscal year 2009 comparable period.

Supervalu updates guidance

Also on Tuesday, Supervalu updated its full year fiscal 2010 guidance, revising identical store sales estimates to roughly negative 5%, compared to the previous guidance of about negative 4%.

Fiscal 2010 net earnings per diluted share are expected to be in the range of $1.95 to $2.05 on a GAAP basis and $2.01 to $2.11 on an adjusted basis, when excluding costs related primarily to store closures.

Net sales for the full year are estimated to be roughly $41 billion.

And, the company anticipates about $700 million in debt reduction for the full year.

"We are on track to deliver our earnings guidance. Sales remain under pressure and, with our focus on margins and expense management, we are countering the underperformance on the top line," Herkert added in the release.

Supervalu is an Eden Prairie, Minn.-based supermarket operator.

MetroPCS holds firm

MetroPCS' term loan was flat on Tuesday even though the company revealed that its subscriber growth for the fourth quarter declined on a year-over-year basis, according to traders.

The term loan was quoted at 96½ bid, 97½ offered by one trader and at 96 7/8 bid, 97 5/8 offered by a second trader, with both traders calling the paper unchanged on the day.

For the quarter ended Dec. 31, MetroPCS' added roughly 317,000 subscribers, compared to 520,000 subscribers in the fourth quarter of 2008.

Gross additions for the quarter were 1.3 million subscribers, an increase of 2% over the prior year.

Churn for the fourth quarter was 5.3%, compared to 5.1% last year.

The company ended the quarter with 6.64 million subscribers, compared to 5.37 million subscribers at Dec. 31, 2007.

MetroPCS is a Dallas-based provider of unlimited wireless communications service with no signed contract.

Spansion price talk

Switching to new deal happenings, Spansion held a bank meeting on Tuesday morning in New York to launch its $450 million five-year term loan, and in connection with the launch, price talk was announced, according to a market source.

The term loan was presented to lenders with talk of Libor plus 550 basis points with a 2.5% Libor floor and an original issue discount in the 98 area, the source said.

In addition, the term loan carries 101 soft call protection for one year.

Spansion lead banks

Barclays and Morgan Stanley are the lead banks on Spansion's exit financing term loan and are asking that lenders place their orders by Jan. 22.

Also as part of the exit financing package, the company will be getting a new $65 million ABL revolver; however, different banks are leading this part of the transaction.

Total leverage is less than 2.0 times.

Spansion is a Sunnyvale, Calif.-based maker of flash memory products.

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