Hexion $1.9 billion credit facility to launch Thursday

By Sara Rosenberg

New York, April 17 - Hexion Specialty Chemicals Inc. is scheduled to hold a bank meeting on Thursday at 2 p.m. ET in New York City to launch its proposed $1.9 billion senior secured credit facility, according to a market source.

J.P. Morgan Securities Inc. and Credit Suisse Securities LLC will act as joint bookrunners and joint lead arrangers on the deal, with J.P. Morgan also acting as administrative agent.

The facility consists of a $1.625 billion seven-year term loan talked at Libor plus 175 basis points, a $50 million seven-year synthetic letter-of-credit facility talked at Libor plus 175 bps and an amended $225 million five-year revolver talked at Libor plus 250 bps, according to an S-1 filed with the Securities and Exchange Commission Friday.

The amended revolver will contain subfacilities for Hexion Canada, as the Canadian subsidiary borrower, Borden Chemical UK Ltd. and Borden Chemical GB Ltd., as the U.K. subsidiary borrowers, Resolution Europe BV, as the Dutch subsidiary borrower, and Hexion Specialty Chemicals GmbH, as the German subsidiary borrower.

The revolver will also have a $100 million letter-of-credit subfacility available to the company and its foreign subsidiaries.

There is a $200 million accordion feature under the proposed credit agreement.

Proceeds from the term loan and synthetic letter-of-credit facility will be used to replace the company's current term loan and synthetic letter-of-credit facility, to redeem all outstanding series A preferred stock and to repurchase all outstanding 8% senior secured notes, 9½% senior second secured notes and 13½% senior subordinated notes.

Revolver borrowings will be available for working capital and other general corporate purposes, including permitted acquisitions and investments.

Hexion filed the S-1 to announce its initial public offering, which is expected to generate net proceeds of about $86 million, assuming the shares are offered at $27.00 per share.

All IPO proceeds, along with cash on hand, will be used to repay $100 million of the new $1.625 billion term loan debt.

Hexion is a Columbus, Ohio, producer of thermosetting resins.

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