Price talk surfaces on Momentive/Hexion $1.2 billion proceeds offering of 10-year notes

By Paul A. Harris

St. Louis, Oct. 26 - Momentive Performance Materials Holdings put out price talk on a combined $1.2 billion proceeds of 10-year notes to be issued separately by Hexion Specialty Chemicals, Inc. (Momentive Specialty Chemicals, Inc.) and Momentive Performance Materials Inc.

The Hexion (Momentive Specialty Chemicals) $440 million proceeds offering of second-lien senior secured notes (Caa1/CCC+) are talked at the 9¼% area. The issuing entities are Hexion U.S. Finance Corp. and Hexion Nova Scotia Finance ULC.

Meanwhile the Momentive Performance Materials $840 million equivalent proceeds of 10-year springing-lien notes (Caal/CCC) are coming in two tranches, with dollar-denominated notes which, like the Hexion notes, are talked at the 9¼% area, and euro-denominated notes, which are talked at the 9 5/8% area.

The Momentive Performance Materials notes will be unsecured prior to the redemption of its 12½% notes due 2011, callable in December 2011 at 106.25. Following that redemption, the new 10-year notes will be backed with second-lien security.

All of the notes come with five years of call protection.

Pricing is set for Wednesday morning.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities, Morgan Stanley & Co. Inc., UBS Investment Bank, Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Goldman Sachs & Co. are the joint bookrunners for the Rule 144A and Regulation S with registration rights offering.

Proceeds will be used to refinance bonds that remain on the books in the wake Apollo Management's acquisition of the two chemical companies earlier this month.

Apollo owns about $234.3 million principal amount of the 9¾% notes, €88.2 million principal amount of the 9% notes and $139.4 million principal amount of the toggle notes, representing approximately 33%, 36% and 65%, respectively, of the outstanding amounts of notes.

Concurrently with the new note offerings, Apollo will enter into an agreement to exchange the entire amount for dollar-denominated springing notes (see related story in this issue).

Momentive Performance Materials Holdings, the parent, is an Albany, N.Y.-based specialty materials company, providing high-technology materials products to the silicone, quartz and ceramics markets.

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