Huntsmen down on sluggish earnings; Allegheny still hot, but cooling

By Carlise Newman

Chicago, July 29 - The combined Huntsman companies on Tuesday reported weaker second-quarter 2003 earnings and, in thin trading, it seemed to be the only bank debt moving, traders said.

Huntsmen's bank debt was seen "in the 90s" by one trader and, more specifically, 94¾ bid, 96 offered by another, which he said was "about a point lower" than Friday when he had last seen it.

Huntsmen 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.

The second quarter 2003 results of the combined Huntsman companies include charges of $39.9 million, consisting of $31.4 million in restructuring charges and a $8.5 million loss on the sale of accounts receivable.

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

"Typically this desk doesn't follow Huntsman but it literally was the only thing I saw today," one trader said.

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.

The second quarter 2003 results of Huntsman International include charges of $39 million, consisting of $30.5 million in restructuring charges and a $8.5 million loss on the sale of accounts receivable.

Allegheny Energy Inc. continued to firm in the wake of an announcement that a subsidiary would sell its energy supply contract with the California Department of Water Resources and associated hedge transactions to Goldman Sachs Group Inc.'s J. Aron & Co. division for $405 million.

Allegheny's bank debt rose to 96½ bid, 97½ offered from 96 bid on Monday, and 94 5/8 bid, 95 1/8 offered on Friday, a trader said.

"Actually I'm a little doubtful of this news from Friday being such a catalyst. The sector has been strong and that's most likely a big part of it," he said.

Proceeds from the sale will be used to reduce debt and improve liquidity, as well as to fund the cost of continuing to reduce the company's financial exposure to energy trading, Allegheny said in a press release.

Allegheny also announced last week that it completed a private placement of $300 million convertible trust preferred securities.

The net proceeds will be used to improve liquidity at Allegheny Energy, help Allegheny Energy Supply meet future collateral requirements and for general corporate purposes.

"It was extremely dead today," a trader said. "Of course that's not unusual but it's never a good thing."

In follow-up news AES Corp. announced Tuesday that it has closed its amended and restated senior secured bank credit facilities, providing for a $250 million four-year revolver and letter of credit facility and a $700 million four-year term loan B which can be extended to five years if certain conditions are met.

Interest on both tranches is Libor plus 400 basis points.

The deal was a little smaller than first planned and the interest rate 25 basis points higher. Previously the term loan had been $750 million in size. Interest on both tranches was initially set at Libor plus 375 basis points.

The term loans are subject to mandatory prepayment with a portion of net cash proceeds of asset sales in excess of $250 million and the proceeds of debt issues.

The loans have a first priority lien and collateral is shared with AES's 10% senior secured notes due 2005 and other secured lenders.

AES said the total amount of credit available under the amended facilities was increased by $135 million to $950 million. The increase, along with cash on hand, was used to repay in full the $150 million balance of the AES New York Funding SELLS loan, resulting in the release of all of the unregistered common stock of AES and other collateral that had secured the loan.

The lead banks for the term loan B were Citigroup, Bank of America and Deutsche Bank. Leads for the revolver were Citigroup and Union Bank of California.

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