S&P ups Hexion notes, cuts revolver, rates loan B+

Standard & Poor's said it assigned a B+ rating with a recovery rating of 3 to Hexion Specialty Chemicals Inc.'s proposed $1.675 billion senior secured term loan and synthetic letter of credit facilities and lowered the rating on the company's existing $225 million revolving credit facility to B+ with a recovery rating of 3 from BB- with a recovery rating of 1 to reflect the similar security package as the new term loan and synthetic letter-of-credit facility.

The existing senior second secured notes were raised to B with a recovery rating of 3 from B- with a recovery rating of 5 to reflect the amount of priority claims of the revolving facility and the first-lien term loan lenders.

S&P affirmed the company's other ratings, including the B+ corporate credit rating, and revised the outlook to stable from negative to reflect the company's slightly better-than-expected operating performance over the past year, the potential for material cash flow generation once the company completes the integration of the merged predecessor companies and begins to realize a modest level of synergies, an improved debt maturity profile and expectation of the successful completion of an initial public offering.

The IPO is expected to provide about $100 million of proceeds to the company for debt reduction, with the balance representing a secondary offering of shares by existing owners. Hexion remains highly leveraged with pro forma total debt to EBITDA near 5.7x, the agency said.

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