Huntsman International's bank debt dropped into the low 90s last week after the company postponed its planned bond offering, a move first reported on LMW's Web site. The decision to pull the deal came after the company found that an excess amount of high-yield issue left the market "uncompetitive," noted Sean Douglas, Huntsman's treasurer. The company will bide its time and come back at a different time, he added. The bond deal, led by Deutsche Bank, was slated to pay down a portion of Huntsman Corp.'s $450 million "B" loan. In anticipation of the pay down, the market for the bank debt ticked up as high as 963/4-97. After the postponement, pieces of the company's term loan "B" were said to have traded in the 92-94 range, but those trades could not be confirmed. Deutsche Bank also leads the bank debt, but officials at the bank declined to comment.
There are a variety of reasons that made it hard for Huntsman to get a bond deal done, said a dealer. He noted the company's leverage and the fact that bond holders lost money on Huntsman not too long ago as reasons why the deal struggled. He also pointed out that Lyondell Chemical Company, a chemical industry competitor to Huntsman, had to price its latest offering of senior secured notes at a lofty 101/2%, which most likely put pressure on Huntsman. "It all boiled down to price," he said. Originally, the notes looked like they would be priced in the 113/4% context, but the coupon was looking more like 121/2%, he said. Douglas said the company's decision to pull the deal was not just a pricing issue, but he declined to elaborate on pricing.
There is a ratcheting feature attached to the company's term loan that will require Huntsman to pay an additional 50 basis points every quarter until a bond deal is completed or the pricing reaches a pre-set ceiling. This feature was set up as an incentive for Huntsman to take out its bank debt through bonds. The company's term loan currently carries a LIBOR plus 63/4% pricing and as of May 31, an additional 2% will be added to the term loan through a payment-in-kind feature. But the increased pricing was not reason enough to complete the bond deal. "Economically it's still better than the high-yield markets right now," said Douglas.