Hexion may sweeten amend-and-extend offer, says Barclays

Barclays Capital analysts say that loan holders can expect Hexion and its equity sponsor Apollo to sweeten the terms of last week’s amend-and-extend offer. The chemicals company proposed extending the maturity of at least $500 million of its $2.2 billion of bank loans by two years to 2015. In return it is offering investors a 150 basis point coupon step-up and a 10bp one-off fee.

Hexion sold a $1 billion secured bond issue last Thursday, and the proceeds are being held in escrow until the loan amendment is completed. That, say the researchers, provides the company with a strong incentive to get the amend-and-extend agreed. In a report published on Friday, the bank argues that investors could push for a springing maturity clause to deal with the 2014 second-lien bonds.