Hexion cuts 8 7/8% notes to $761 million; working capital to decline

By Devika Patel

Knoxville, Tenn., Nov. 14 – Hexion Inc. plans to continue buying back its 8 7/8% notes at a discount, according to the company’s chief financial officer. It has already reduced the outstanding principal to $761 million. The company also said it expects a decline in its working capital during the fourth quarter.

“Working capital trends are consistent with historical trends,” executive vice president and chief financial officer George Knight said on the company’s Monday conference call announcing third quarter earnings.

“Working capital is expected to decline in the fourth quarter, but we still expect a slight increase in net working capital overall for 2016,” Knight said.

8 7/8% notes

Regarding the company’s 8 7/8% notes, Knight said that the company hopes to buy the debt back at a discount and that Hexion has already reduced the debt by $439 million in the last quarter.

“We continued to look for opportunities to buy back the debt at a discount in the third quarter, dropping the balance from $1.2 billion where we started last year third quarter down to $761 million. So we’ll continue to look for opportunities on that front as they come available.

“We are very focused at looking at other options keeping in mind when the debt is going to become current,” Knight said.

Liquidity

At Sept. 30, Hexion had total debt of approximately $3.5 billion compared to $3.8 billion at Dec. 31, 2015. In addition, at Sept. 30, the company had $496 million in liquidity comprised of $126 million of unrestricted cash and cash equivalents, $324 million of borrowings available under the company’s asset-backed loan facility and $46 million of time drafts and availability under credit facilities at international subsidiaries.

The company had net sales of $819 million and a net loss of $47 million in this quarter. Hexion’s total segment EBITDA was $112 million, a decrease of 5% compared with the prior period. The company’s adjusted EBITDA was $443 million for the trailing 12 months.

Total liquidity as of Sept. 30 was $496 million.

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

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