Huntsman Said to Seek Lender Consent for Rockwood Unit Financing

Huntsman Corp. (HUN), the chemical maker acquiring Rockwood Specialties Inc.’s titanium dioxide business, is seeking permission from lenders to borrow $1.15 billion in loans to partly finance the purchase, according to two people with knowledge of the deal.

Huntsmans also wants to double a revolving credit line to $800 million, said the people, who asked not to be identified because the information isn’t public. Half of the increased amount would support the acquisition with the remaining $200 million available for future use.

Huntsman is buying Rockwood’s unit for $1.1 billion in cash and the assumption of unfunded pension liabilities estimated at $225 million on June 30, Salt Lake City-based Huntsman said in a Sept. 20 regulatory filing. The company received a financing commitment from JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., according to a presentation on the company’s website.

The additional debt would result in $45 million to $55 million of interest expense annually, according to the presentation. The ratio of total debt to adjusted earnings before interest, taxes, depreciation or amortization would be about 3.3 times.

Standard & Poor’s affirmed its BB corporate credit rating on Huntsman and revised the outlook to “negative.” Its BB-senior unsecured debt rating was placed on creditwatch with negative implications, indicating “weakening recovery prospects for unsecured creditors” if the acquisition is financed with all senior secured debt, New York-based analysts led by Cynthia Werneth wrote in a Sept. 20 report.

Lender Fee

Huntsman had $3.77 billion of total debt as of June 30, according to a July 31 regulatory filing, including $1.6 billion of term loans, $646 million of senior notes and $892 million of senior subordinated bonds.

Lenders consenting to the proposed amendment will receive a fee of 15 basis points, the people said. Huntsman is asking creditors to respond by Oct. 1.

Gary Chapman, a spokesman for Huntsman, was out of the office and didn’t immediately return a telephone call seeking comment.

Huntsman is also asking that proceeds of the proposed debt be used to refinance borrowings if the acquisition is not consummated, said the people.

In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan, it can’t. A basis point is 0.01 percentage point.

To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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