Ashland releases price talk and structure of USD 1.61bn loan

This article is provided to FT.com readers by Debtwire—the most informed news service available for financial professionals in fixed income markets across the world. www.debtwire.com

--------------------------------------------------------------------------------------------------------

Bank of America re-approached investors this week with a USD 1.61bn loan backing chemical manufacturer Ashland that it pulled from the market the week Lehman filed for bankruptcy. The hung deal funded Ashland’s USD 3.3bn purchase of Hercules Inc.’s and its reappearance epitomizes the recovery of risk appetite in recent weeks.

The bank hopes to steal momentum from this month’s slew of new issuance in the high-yield market, and re-start a market that all but died last fall, a buysider told Debtwire. “Obviously they feel like now is the time to test the waters,” he said.

Discovery Communications did successfully move a USD 500m term loan C on 13 May at Libor+ 325bps and with a Libor floor of 2%. But no other deal of Ashland’s size has successfully syndicated in the last seven-plus months.

Long strange trip

It’s been a hard slog for loan syndication over the past nine months. Credit Suisse and Wachovia tried to place a USD 425m loan backing JDA Software shortly after Ashland bowed out only to pull their deal as well in early October. Royal Bank of Canada and Deutsche Bank tried a USD 1.2bn leveraged financing for Precision Drilling but that ultimately stalled in late November, nailing the coffin shut on primary markets.

As panic over the financial sector eased in early April, Transaction Network Services (TNS), a Virginia-based communication solutions company, secured a USD 250m add-on TLB. Nalco, an Illinois-based water treatment company, followed suit with a USD 500m TLB this month, as did Discovery.

Those early forays set the stage for Ashland’s chunky USD 830m term loan B, which closed slightly bigger than the USD 750m originally contemplated, the buysiders said. The Libor+ 440bps loan priced at an original issue discount of 98.50 on 21 May but traded north of 100 in the aftermarket.

Both the TLB and TLA include a Libor floor of 3.25%, said an Ashland spokesman. The original structure contemplated USD 1.75bn total of loans with a Libor floor of 3% and a 98 OID.

On 30 April, Ashland reported a 33% y-o-y decline in net income for its fiscal 2Q09 ended 31 March, to USD 48m from USD 72m, after being crushed by a commodity pricing decline. Still, that was better than some Street analysts predicted. Its equity traded at USD 26.31 per share today, up from USD 21.96 per share on 30 April.

Earlier in the week, Ashland priced a USD 650m 9.125% senior unsecured note due 2017 at 96.577% to yield 9.75% that will repay a USD 750m bridge loan. The new bond was upsized by USD 50m.

Ashland’s existing 6.5% USD 50.25m note due 2029 jumped to 56 on 20 May, according to MarketAxess. It last traded at 32.5 on 20 April, according to MarketAxess.

--------------------------------------------------------------------------------------------------------

For more information or to inquire about a trial please email sales@debtwire.com or call Americas: +1 212-686-5374 Europe: +44 (0)20 7059 6113 Asia-Pacific: +852 2158 9731