Hexion Specialty Chemicals to sell $825 million senior secured bonds

By Paul Deckelman

New York, Oct. 12 - Hexion Specialty Chemicals Inc. unveiled plans Thursday for an $825 million issue of senior secured bonds as part of a larger financing program for the Columbus, Ohio-based maker of thermoset resins.

Information about the upcoming bond deal is sketchy, with no details immediately available about its timing or structure or the new bonds' tenor, although a company spokesman told Prospect News that the offering would likely come to market "in the near term," which he said meant more or less concurrently with a tender offer for three series of Hexion's outstanding notes, to be funded out of the bond deal proceeds, which was also announced on Thursday. The tender offer has an Oct. 24 consent solicitation deadline, and is scheduled to expire on Nov. 8, with both deadlines subject to possible extension.

Credit Suisse Securities USA LLC is dealer-manager on the tender offer.

Hexion announced that it would sell the bonds and at the same time expects to enter into a new $2 billion term loan facility, and a new $50 million synthetic letter-of-credit facility. These facilities will replace a $1.625 billion seven-year term loan facility and a $50 million seven-year synthetic letter-of-credit facility which it entered into in early May, both at 200 basis points over Libor. Hexion will meantime continue to have access to a $225 million five-year revolving credit line, which it also entered into in May at 250 bps over Libor.

The privately held company intends to pay a $500 million common stock dividend to its shareholders and to fund the tender offer purchase next month of its $300 million of second-priority senior secured floating-rate notes due 2010 (issued in separate $150 million tranches in 2004 and 2005) and its $325 million of 9% second-priority senior secured notes due 2014, using the bond deal proceeds and the additional $375 million of cash available under its new credit facilities.

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