Exhibit B
[LOGO] HERCULES
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HERCULES INCORPORATED
Presentation to the Board of Directors
December 12, 2001
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AGENDA
Introduction
Current conditions in the debt capital markets
Recent performance of Hercules' debt vs. comparables
Refinancing strategies
Positioning
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INTRODUCTION
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INTRODUCTION
o Absent a substantial asset sale, Hercules must execute a refinancing by
the end of 2002
o Debt markets have been volatile, with notable improvement since 2Q01
(despite market weakness after 09/11)
o Hercules' debt has responded particularly well since the Company gave
guidance around improving performance in 2002
- lenders focused on merits of credit as opposed to "asset sale story"
o Original bank lenders fatigued in absence of strong bank group leadership
and protracted under-performance relative to plan
- loan classified as "Substandard" by SNC
o Today, Hercules has full access to the capital markets to pursue a
complete or partial refinancing
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SCHEDULED MATURITIES AND AMORTIZATION
Hercules currently faces substantial refinancing risk in 2003, which should be
addressed in any partial refinancing
[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
YEARLY MATURITIES
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($ in millions)
2001 2002 2003 2004 2005 2006 2007 2008
$53.1 $234.2 $909.0 $3.8 $356.8 $58.0 $400.0 $0.0
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CURRENT CONDITIONS IN THE DEBT CAPITAL MARKETS
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CURRENT SENIOR DEBT MARKET CONDITIONS
o Substantial liquidity currently in the institutional loan market
- investors flush with uninvested cash / new issue volume off sharply
- secondary market levels up over 200 bps over the past 6 weeks
o Traditional bank loan market continues to shrink and remains weak
o Current credit problems tempering investors' appetite for new issues
o Flight to quality: investors favoring larger, higher-rated issuers
o Refocus on asset values to complement cash flows
o 6-month LIBOR of 1.98% represents lowest benchmark level in over 40 years
o Credit spreads, while currently higher than 1H01, are still attractive
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AVERAGE BB/BB- BANK DEBT RATING NEW ISSUE SPREAD
MONTH MONTH
ENDED ENDED
2Q01 3Q01 11/08/01 12/06/01
Pro rata spread L+278.0 L+277.0 L+341.7 L+333.3
Weighted avg. institutional spread L+318.0 L+329.0 L+416.7 L+354.2
Pro forma debt/EBITDA 4.0x 3.8x 3.3x 3.5x
Pro forma senior debt/EBITDA 2.5x 3.4x 2.5x 2.3x
HERCULES' CURRENT CREDIT STATISTICS
2001E 2002E
Sr. Secured Debt/EBITDA 4.0x 3.0x
Total Debt/EBITDA 4.9x 3.7x
Total Financings/EBITDA 6.3x 4.7x
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BOND MARKET CONDITIONS
o Substantial liquidity in the market
o Current trading levels price in a very robust economic recovery
o Primary use of proceeds has been for bank debt refinancing
o BB rated, industrial issuers are in the sweetspot of the current market
o Significant volatility in 2001
- despite market weakness post September 11th, today's market is as
strong as ever
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RECENT PERFORMANCE OF HERCULES' DEBT VS. COMPARABLES
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HERCULES' DEBT TRADING PERFORMANCE
11 1/8% SR. UNSECURED NOTES
HERCULES 11 1/8% SPREAD-TO-WORST HERCULES 11 1/8% DOLLAR PRICE
-------------------------------- -----------------------------
Graph omitted reflecting Graph omitted reflecting
Hercules 11 1/8% Sr. Unsecured Hercules 11 1/8% Sr. Unsecured
Notes spread-to-worst range of Notes dollar price range of
approximately 550 bps to 850 bps approximately 92 to 104 per
for dates from 11/23/00 to 12/05/01. $100 face value for dates from
11/23/00 to 12/05/01.
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HERCULES' DEBT TRADING PERFORMANCE (continued)
TERM LOAN D
HERCULES TERM LOAN D TRADING PERFORMANCE
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Graph omitted reflecting
Bid Level with range of approximately
92 to 100 per $100 face value
between 03/26/01 to 11/30/01 for
Hercules Term Loan D.
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HERCULES' RELATIVE SPREADS
CURRENT VS AT ISSUE
RELATIVE VALUE: INSTITUTIONAL TERM LOAN VS SR. UNSECURED DEBT
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[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART] [BAR CHART]
AT ISSUE (11/09/00) CURRENT (12/07/01)
Bond 529 Bond 550
Term loan 333 Term loan 383
AT ISSUE CURRENT
----------------------------- -----------------------------
PRICE ABSOLUTE YIELDS PRICE ABSOLUTE YIELDS
Bonds 100.00 11.125% Bonds 104.00 10.21%
Bank 99.75 10.02% Bank 98.25 5.81%
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REFINANCING STRATEGIES
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TRANSACTION SUMMARY
SCENARIO I -- PARTIAL REFINANCING - BALANCE SHEET AS OF 09/30/01
SOURCES USES
- ---------------------------------- ---------------------------------------
($ in millions)
Term Loan E $500.0 Revolver(1) $227.0
Senior Unsecured Notes 350.0 Term Loan A 543.0
ESOP 60.0
Fees 20.0
- ---------------------------------- ---------------------------------------
TOTAL SOURCES $850.0 TOTAL USES $850.0
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(1) Commitment reduced to $800 million.
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LIQUIDITY ANALYSIS
SCENARIO I
Even after making the 2002 tax payment, the revolving credit facility provides
roughly $300 million of liquidity
($ in millions)
Revolver (09/30/01) $517
Letter of credit 100
TOTAL USAGE $617
Taxes due in 2002 120
PROJECTED USAGE $737
Refinancing payment 227
PRO FORMA USAGE $510
Total availability 800
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AVAILABLE LIQUIDITY $290
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2003 REFINANCING RISK
Refinancing will smooth maturities while limiting refinancing risk to the
Revolving Credit Facility and Notes due in 2003
[The following tables were depicted as bar charts in the printed materials.]
[BAR CHART]
SCHEDULED MATURITIES -
PRE REFINANCING
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($ in millions)
2001 2002 2003 2004 2005 2006 2007 2008
$53.1 $234.2 $909.0 $3.8 $356.8 $58.0 $400.0 $0.0
[BAR CHART]
SCHEDULED MATURITIES -
POST REFINANCING
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($ in millions)
2001 2002 2003 2004 2005 2006 2007 2008 2009
$0.0 $3.8 $418.8 $3.8 $356.8 $58.0 $400.0 $500.0 $389.0
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PROJECTED CREDIT STATISTICS AND PROPOSED COVENANT
LEVELS
Immediately following a transaction, covenants would be set at 5.5x, stepping
down to a level between 5.00x and 5.25x after a year
($ in millions) FYE 2002
SUMMARY PRO FORMA CREDIT STATISTICS
Sr. Secured debt / EBITDA 2.53x
Total debt / EBITDA 3.93x
Total financings / EBITDA 4.82x
PROPOSED COVENANT LEVELS
EBITDA $599
Total debt $2,357
Total debt / EBITDA 3.93x
Proposed test 5.00x
EBITDA cushion 115
MINIMUM EBITDA FOR COMPLIANCE 485
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TRANSACTION SUMMARY
SCENARIO II - COMPREHENSIVE REFINANCING
We believe that the Company could also embark upon a comprehensive refinancing
SOURCES USES
- ------------------------------------ ------------------------------------
($ in millions) ($ in millions)
$300 million Revolver $0 Revolver $517
Additional Term Loans 913 Term Loan A 543
Senior Unsecured Notes 400 ESOP 103
Tax payment 120
Fees and expenses 30
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TOTAL SOURCES $1,313 TOTAL USES $1,313
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POSITIONING
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POSITIONING
o Diverse business
- products
- end markets
- geography
o Strong market positions
o Limited downside/significant upside
o Defined cost cutting plan
o Well respected CEO with proven track record
o Diminimis refinancing risk
o Stable earnings performance in challenging environment
o Scale
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[LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I
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APPENDIX I
Chemical industry debt market conditions
1
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CURRENT DEBT MARKET CONDITIONS
o The debt capital markets are extremely liquid with managers looking to
invest substantial amounts of cash
o While the market is as strong as ever, investors' appetite favors larger,
higher-rated issuers
- BB rated, industrial issuers are in the sweet-spot of the market
o Chemical issuers have not been overlooked, as current trading levels
reflect investors' belief in a V-shaped recovery
HIGH-YIELD RETURNS
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2Q2001 3Q2001 QTD 4Q2001
High-yield composite (2.30%) (1.99%) 6.63%
BB composite 1.30% 5.24% 5.14%
Basic materials composite 0.87% 4.49% 4.60%
Wireless Telecom composite (6.85%) (17.14%) 18.01%
Wireline Telecom composite (23.38%) (42.70%) 5.68%
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CHEMICAL COMPOSITE (1.14%) 1.01% 4.60%
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RECENT HIGH YIELD MARKET DYNAMICS
KEY ECONOMIC INDICATORS
12/07/01: Unemployment rate for the month of November came in at 5.7% vs. 5.6%
12/06/01: US initial jobless claims was 475k vs. 456k est.
11/27/01: US consumer confidence was 82.2 vs. 86.5 est.
11/19/01: Housing starts for the month of October were 1,552k vs. 1,500k
[The following table was depicted as a combination bar and line chart
in the printed materials.]
[BAR CHART]
WEEKLY NEW ISSUE VOLUME ($ MILLIONS)
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($ IN MILLIONS)
1-Oct 8-Oct 15-Oct 22-Oct 29-Oct 5-Nov 12-Nov 19-Nov 26-Nov 3-Dec 10-Dec
Volume $0.0 $0.6 $0.2 $0.9 $1.0 $0.8 $1.2 $1.3 $0.5 $2.0 $2.2
($ IN BILLIONS)
Visible forward calendar [Chart omitted reflecting range of values for visable forward calendar
of approximately $0.25 B to $3.5 B from October 2001 to December 2001]
[BAR CHART]
ANNUAL NEW ISSUE VOLUME BY RATING
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NEW ISSUANCE ($ BN)
[all numbers in chart as summarized below are approximations based on review of
hard copy of chart]
1995 1996 1997 1998 1999 2000 2001
4 B's [Chart omitted reflecting range of new issuances
approximately $8 b to $30 b from 1995 to 2001]
3 B's [Chart omitted reflecting range of new issuances
approximately $5 b to $20 b from 1995 to 2001]
2 B's and below [Chart omitted reflecting range of new issuances
approximately $20 b to $100 b from 1995 to 2001]
Emerging markets [Chart omitted reflecting range of new issuances
approximately $0 b to $12 b from 1995 to 2001]
MARKET SIZE [Chart omitted reflecting range of approximately
$250 b to $600 b from 1995 to 2001]
Note: Data as of December 7, 2001.
SECONDARY SPREADS BY CREDIT RATINGS - CORPORATE INDUSTRIALS
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RATINGS
MOODY'S S&P SPREAD OVER 5.01% TREASURY ABSOLUTE YIELD
Baa3 BBB- 249 bps 7.50%
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Bal BB+ 364 bps 8.65%
Ba2 BB 437 bps 9.38%
Ba3 BB- 487 bps 9.88%
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B1 B+ 517 bps 10.18%
B2 B 636 bps 11.37%
B3 B- 784 bps 12.85%
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MUTUAL FUNDS FLOW ACTIVITY
IN ADDITION TO MUTUAL FUNDS, INSURANCE AND PENSION FUNDS ARE INCREASING EXPOSURE
TO HIGH YIELD
HIGH YIELD MUTUAL VS. EQUITY FUNDS FLOW (FIGURES IN $ MILLIONS)
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Graph omitted reflecting High Yield mutual (approximately -600 to 900) versus
Equity Funds flow (approximately -5,000 to 8,000) between Jan 01 and Dec 01.
Source:
HIGH YIELD MUTUAL FUND LIQUID ASSETS AS A PERCENTAGE
OF TOTAL ASSETS (AS OF OCTOBER 31, 2001)
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Graph omitted reflecting mutual fund liquid assets as a percentage of
total assets ranging from approximately 4.3% to 9.0% between Feb 2000 and
Oct 2001.
Source:
4
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LEVERAGED LOAN MARKET ACTIVITY
MARKET SUPPLY/DEMAND DYNAMICS CONTINUE TO FAVOR NEW ISSUERS AS NEW ISSUE VOLUME
CONTINUES TO BE LIGHT WITH ONLY $1.7 BILLION OF INSTITUTIONAL PAPER PLACED SINCE
OCTOBER AND VERY LITTLE DEAL FLOW EXPECTED FOR THE REMAINDER OF THIS YEAR
RECENT LEVERAGED LOAN MARKET ACTIVITY
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[BAR CHART]
Recent leveraged loan market activity
Dates: 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 21-Nov
Volume $8.0 $8.0 $6.0 $7.0 $7.0 $7.0 $5.0 $5.0
Number of Deals 29 22 21 27 28 27 22 22
Dates: 29-Nov 6-Dec
Volume $4.0 $6.0
Number of Deals 21 32
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DEAL STRUCTURE TRENDS
WHILE INVESTORS CONTINUE TO BE VERY CAUTIOUS AND EXTREMELY CREDIT-FOCUSED WHEN
COMMITTING TO LEVERAGED LOANS, THEY REMAIN WILLING TO COMMIT CAPITAL TO LARGER
SIZED ISSUERS WITH A STRONG CREDIT STORY
AVERAGE DEBT MULTIPLE OF HIGHLY LEVERAGED LOANS
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[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
MULTIPLE OF EBITDA
1989 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 3Q01 ME 12/6/01
Bank debt/EBITDA 3.39 3.35 2.58 2.68 2.81 3.25 3.50 3.62 3.50 3.25 2.87 2.46 1.83
Non-bank debt/EBITDA 3.28 1.99 2.37 2.46 2.52 1.91 2.25 2.05 1.70 1.20 1.16 1.23 1.87
Total 6.67 5.34 4.95 5.14 5.33 5.16 5.75 5.67 5.20 4.45 4.03 3.69 3.70
Note: 1991 is excluded due to lack of data. Criteria pre-1996: L+250 and higher;
1996 to date: L+225 and higher. Media loans excluded.
Source:
AVERAGE EQUITY CONTRIBUTION TO LEVERAGED BUYOUTS
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[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
EQUITY AS A % OF TOTAL SOURCES
1989 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 1Q01 2Q01 3Q01
Rollover equity 3.3% 3.5% 4.1% 3.9% 5.1% 9.6% 0.5%
Continued equity 13.4% 20.7% 22.0% 25.2% 26.2% 23.7% 22.9% 30.0% 31.6% 35.7% 37.8% 39.6% 38.9% 39.1%
Note: 1991 is excluded due to lack of data. Equity includes: common equity and
preferred stock as well as holding company debt and seller note proceeds
downstreamed to the operating company as common equity.
Source:
6
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CURRENT BOND TRADING LEVELS
SPECIALTY AND COMMODITY
------------ ---------
INEOS ISP
ACRYLICS HI GEO HERCULES RESOLUTION NOVEON CHEMCO AVERAGE
- ----------------------------------------------------------------------------------------------------------------------------------
($ in millions except where noted)
Coupon 10.25% 10.125% 10.125% 11.125% 13.50% 11.00% 10.25% 10.91%
Issue Sr. Uns Sr. Sub Sr. Sub Sr. Uns Sr. Sub Sr. Sub Sr. Sub --
Maturity May 10 July 07 Aug-08 Nov-07 Nov-10 Feb-11 Jul-11 --
Amount (euro)200 $600 120 400.0 75.0 275.0 200.0 --
Price 87.0 93.0 86.0 104.0 110.0 107.0 103.0 98.6
Yield-to-worst 12.81% 11.54% 13.36% 10.20% 11.37% 9.63% 9.68% 11.22%
Spread 842 671 867 575 662 484 485 655
Yield-to-maturity 12.81% 11.54% 13.36% 10.20% 11.66% 9.82% 9.76% 11.31%
Rating (Moody/S&P) B3/B+ B2/B B3/B- Ba2/B+ B2/B B3/B B2/B+ --
FINANCIALS (LTM 09/30/01)
Revenue (euro)939 $3,537 $193 $2,726 $913 $1,093 $785 --
EBITDA 119 564 41 429 147 177 182 --
Interest expense 66 227 16 202 70 84 55 --
CapEx 48 244 9 88 22 39 38 --
Total debt 619 3,154 225 2,208 601 906 610 --
CREDIT STATISTICS
EBITA/interest expense 1.8x 2.5x 2.5x 2.0x 2.1x 2.1x 3.3x 2.3x
EBITDA - CapEx/interest expense 1.1x 1.9x 2.3x 1.6x 1.8x 1.6x 2.6x 1.9x
Debt/EBITDA 5.2x 5.6x 5.5x 5.1x 4.1x 5.1x 3.4x 5.0x
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COMPARABLE YIELDS
[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
YIELD TO WORST
Sovereign Specialty/11.75% 12.26%
Huntsman International/10.125% 11.53%
Acetex/10.875% 11.17%
Hercules/11.125% 10.21%
Equistar/10.125% 9.91%
ISP/10.25% 9.68%
Noveon/11.0% 9.63%
Lyondell/9.500% 9.50%
IMC Global/10.875% 9.41%
OM Group/9.25% 9.25%
Georgia Gulf/10.375% 9.08%
Millennium/9.25% 8.81%
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COMPARABLE LEVERAGE
LTM 09/30/2001
[The following table was depicted as a combination bar and line chart
in the printed materials.]
[BAR CHART]
TOTAL DEBT/EBITDA YIELD TO WORST %
Sovereign Specialty 6.1x Chart omitted
Huntsman International 5.4x reflecting
Acetex 3.9x % of yield-to-
Hercules 5.1x worst range
Equistar 11.0x of approximately
ISP 3.4x 8.75% to 12.0%
Noveon 5.1x for companies in
Lyondell 6.3x chart.
IMC Global 6.5x
OM Group 4.5x
Georgia Gulf 5.9x
Millennium 4.7x
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HIGH YIELD TRADING PERFORMANCE
10/22/01 - 12/10/01
[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
BID PRICE
October 22 Today
Hercules/11.125% $96.5 $104.0
ISP/10.25% $95.5 $103.0
Noveon/11.00% $100.0 $107.0
Acetex/10.875% $93.0 $98.5
Georgia Gulf/10.375% $102.0 $105.0
Geo Specialty/10.125% $85.0 $86.0
NL Industries/11.75% $98.0 $98.0
Avecia Group/11.00% $95.0 $96.0
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COMPARABLE YIELDS
10/22/01-- 12/10/01
[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
YIELD TO WORST
October 22 Today
Hercules/11.125% 11.95% 10.20%
ISP/10.25% 11.01% 9.68%
Noveon/11.00% 11.00% 9.63%
Acetex/10.875% 12.29% 11.17%
Georgia Gulf/10.375% 10.37% 9.08%
Geo Specialty/10.125% 13.56% 13.36%
NL Industries/11.75% 12.90% 12.97%
Avecia Group/11.00% 12.00% 11.81%
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COMPARABLE SPREADS
10/22/01 - 12/10/01
[The following table was depicted as a bar chart in the printed materials.]
[BAR CHART]
SPREAD TO TREASURY (BPS)
October 22 Today
Hercules/11.125% 813 575
ISP/10.25% 720 485
Noveon/11.00% 719 484
Acetex/10.875% 811 631
Georgia Gulf/10.375% 656 467
Geo Specialty/10.125% 983 867
NL Industries/11.75% 1,073 1,000
Avecia Group/11.00% 820 697
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NON-INVESTMENT GRADE BOND ISSUANCE
YTD 2001 VS 2000
OFFER
DATE ISSUER ISSUE SIZE COUPON MATURITY
- ----------------------------------------------------------------------------------------------------------------------------
12/07/2001 OM Group Sr. Sub. Notes (144 A) 400,000 9.250 2011
11/30/2001 Lyondell Chemicals Sr. Sec. Notes 393,000 9.500 2008
11/15/2001 COMPASS MINERALS SR. SUB. NOTES (144A) 250,000 10.000 2011
11/08/2001 Resolution Performance Products Sr. Sub. Notes (144A) -- add-on 75,000 13.500 2010
11/07/2001 ISP Chem Co Sr. Sub. Notes (144A) -- add-on 100,000 10.250 2011
10/30/2001 IMC Global Inc. Sr. Notes (144A) -- add-on 100,000 11.250 2001
10/03/2001 Terra Capital Inc. Sr. Sec. Notes 200,000 12.875 2008
08/16/2001 Equistar Sr. Notes 700,000 10.125 2008
08/01/2001 ACETEX CORP. SR. NOTES 190,000 10.875 2009
07/24/2001 International Specialty Products (ISP) Sr. Sub. Notes (144A) -- add-on 100,000 10.250 2011
07/11/2001 Ineos Plc Sr. Notes (144A) 223,782 10.500 2010
06/20/2001 INTERNATIONAL SPECIALTY PRODUCTS (ISP) SR. SUB. NOTES (144A) 200,000 10.250 2011
06/13/2001 Millenium America Inc. Senior Notes 275,000 9.250 2008
06/15/2001 Macdermid Inc. Sr. Sub. Notes (144A) 301,500 9.125 2011
05/11/2001 Messer Griesheim Sr. Notes (144A) -- EURO 481,580 10.375 2011
05/08/2001 IMC Global Inc. Sr. Notes (144A) 200,000 11.250 2011
05/08/2001 IMC Global Inc. Sr. Notes (144A) 400,000 10.875 2008
04/24/2001 HUNTSMAN INTERNATIONAL LLC SR. SUB. NOTES -- ADD ON -- EURO 44,725 10.125 2009
03/06/2001 HUNTSMAN INTERNATIONAL LLC SR. NOTES (144A) -- EURO 185,500 10.125 2009
02/23/2001 NOVEON (BF GOODRICH) SR. SUB. NOTES 275,000 11.000 2011
TOTAL: 5,095,087
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11/09/2000 Hercules Sr. Notes (144A) 400,000 11.125 2007
11/08/2000 Resolution Performance Products Sr. Sub. Notes (144A) 200,000 13.500 2010
09/22/2000 CP Kelco (Europe) Sr. Sub. Notes (144A) -- EURO 219,428 11.875 2010
08/21/2000 Neste Chemicals (Europe) Sr. Notes (144A) -- EURO 9,022 12.250 2010
08/03/2000 Neste Chemicals (Europe) Sr. Notes (144A) -- EURO 217,584 12.250 2010
07/25/2000 Vantico (Europe) Sr. Notes (144A) -- EURO 234,650 12.000 2010
04/27/2000 INEOS ACRYLICS PLC (UK) SR. NOTES (144A) -- EURO 182,260 10.250 2010
03/24/2000 Sovereign Specialty Chemical Inc. Sr. Sub. Notes (144A) 150,000 11.875 2010
TOTAL: 1,612,944
OFFER ISSUE
DATE CALL MOODY'S S&P PRICE YIELD SPREAD
- --------------------------------------------------------------------------------------
12/07/2001 NC5 B2 B+ 100.000 9.250 419
11/30/2001 NC4 B3 BB 100.000 9.500 493
11/15/2001 NC5 B3 B 100.000 10.000 542
11/08/2001 NC4 B2 B 106.791 12.000 799
11/07/2001 NC5 B2 BB- 101.500 9.960 575
10/30/2001 NC5 Ba1 BB- 100.690 11.047 659
10/03/2001 make-whole B3 BB- 99.430 13.000 874
08/16/2001 MW -- Call Ba1 BBB- 100.000 10.125 531
08/01/2001 NC4 B2 B+ 100.000 10.875 580
07/24/2001 NC5 B2 BB- 99.50 10.328 521
07/11/2001 NC3 B2 B+ 100.000 10.500 548
06/20/2001 NC5 B2 BB- 98.470 10.500 530
06/13/2001 MW-Call Ba1 BBB+ 100.000 9.250 409.5
06/15/2001 NC5 BA3 BB- 99.505 9.200 400
05/11/2001 NC5 B2 B+ 100.000 10.375 548
05/08/2001 NC5 BA1 BB 97.799 11.625 640
05/08/2001 NC BA1 BB 98.790 11.125 590
04/24/2001 NC5 B2 B 102.500 9.570 489
03/06/2001 NC5 B2 B 102.500 9.582 501
02/23/2001 NC5 B3 B 100.000 11.000 589
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11/09/2000 NC BA2 BB- 100.000 11.125 529
11/08/2000 NC5 B2 B 98.661 13.750 790
09/22/2000 NC5 B3 B 100.000 11.875 655
08/21/2000 make-whole B3 B 100.000 12.246 647
08/03/2000 NC5 B3 B 100.000 12.250 705
07/25/2000 NC5 B3 B- 100.000 12.000 679
04/27/2000 NC5 B3 B+ 100.000 10.250 200
03/24/2000 NC5 B3 B- 99.288 12.000 587
Note: Bold indicates [ILLEGIBLE] nvolvement, $ in thousands.
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INSTITUTIONAL LOAN TRADING LEVELS
INSTITUTIONAL TRANCHE TERM LOANS - TRADING PERFORMANCE AS OF DECEMBER 10, 2001
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INTEREST DISCOUNT DISCOUNT
LOAN BID OFFER MATURITY SPREAD RATE SPREAD YIELD
OM Group 99.3 99.8 May-08 300 5.00% 325 5.25%
Compass Minerals 100.5 100.9 Nov-09 350 5.50% 333 5.33%
GEO 95.5 96.5 Dec-07 375 5.75% 525 7.25%
Hercules - D 98.3 98.8 Nov-05 325 5.25% 383 5.81%
Huntsman International 97.5 98.0 Jun-07 300 5.00% 383 5.83%
Ineos Acrylics 99.5 100.0 Oct-07 250 4.50% 267 4.67%
Noveon 99.8 100.1 Aug-08 375 5.75% 383 5.83%
ISP 99.5 100.0 Jun-08 300 5.00% 317 5.17%
Resolution 99.9 100.5 Oct-08 375 5.75% 379 5.79%
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MEAN 98.9 99.4 328.6 5.28% 368.0 5.68
MEDIAN 99.5 100.0 325.0 5.25% 379.0 5.79
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Note: Assumes three month LIBOR spread of 2.00%.
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NON-INVESTMENT GRADE
SENIOR DEBT
DATE ISSUER ISSUE AMOUNT COUPON MATURITY S&P/Moody's
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11/2001 COMPASS MINERALS RC, T/LB 135, 225 L+350 6.5 YR, 8 YR BB-/B1
09/2001 Terra Industries RC 175 L+275 3.75 yr BB/B1
08/2001 Equistar Chemicals RC, T/LB 500, 500 L+250, L+300 5 yr, 6 yr BBB/Ba3
07/2001 Ferro Corp. RC 200, 400 L+200, L+200 364, 5yr BBB-/Ba3
06/2001 ISP RC, T/LB 225, 225 L+250, L+300 5 YR, 7 YR BB+/Ba1
06/2001 Millennium Chemicals RC, T/LB 175, 225 L+200, L+250 5 yr, 5 yr BBB-/Ba3
05/2001 GEO SPECIALTY CHEMICALS RC, T/LB 40, 105 L+325, L+375 4 YR, 6.5 YR B+/B1
05/2001 OM Group RC, T/LB 350, 300 L+300, L+300 9 mo, 7 yr BB/Ba3
05/2001 Messer Gresheim RC, T/LA, B, C (EURO)310, 370,170,115 L+225, L+225 7yr/7 yr, 8yr/9yr BB/Ba3(pound)
04/2001 IMC Global RC,T/LB 210, 290 L+300, L+375 5 yr/5.5 yr BB+/Baa3
04/2001 Buckeye Technologies RC 215 L+300, L+375 4 yr NR
03/2001 Millennium Chemicals RC, T/LA 100, 400 L+137.5 1 yr, 5 yr NR/NR
02/2001 NOVEON RC, T/LA, T/LB 125, 125, 510 L+300, L+300, L+350 6 YR, 6 YR, 7.5 YR BB-/B1
01/2001 RK Polymers RC, T/LA, T/LB 50,30,270 L+300, L+300, L+425 6 yr, 6 yr, 8 yr BB-/B1
Note: Bold indicates [ILLEGIBLE] nvolvement.
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RECENT TRANSACTION PROFILES
CHEMICAL SECTOR
GEO
LYONDELL COMPASS SPECIALTY
($ in millions) CHEMICALS MINERALS EQUISTAR CHEMICALS IMC GLOBAL MILLENNIUM NOVEON
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TRANSACTION DATA
Rating (S&P/Moody's) Ba3/BB B1/BB- Baa3/BBB- B+/B2 BB/Ba1 BBB-/Ba1 BB-/B1
Transaction date November 2001 November 2001 August 2001 May 2001 April 2001 June 2001 February 2001
Transaction size $393 million $630 million $1,065 million $145 million $1.1 billion $675 million $1,437 million
PRO FORMA OPERATING DATA $ $ $ $ $ $
------------- ------------- -------------- ------------ ------------ ------------- --------------
LTM Revenue $3,345 $ 398 $7,111 $ 225 $2,884 $1,814 $1,149
LTM EBITDA 611 120 $ 354 54 496 311 212
% REVENUE 18.2% 30.0% 5.0% 24.0% 17.2% 17.1% 18.4%
LTM CapEx 69 44 136 11 213 117 63.8
% EBITDA 11.2% 36.7% 38.4% 21.0% 42.9% 37.6% 30.0%
CAPITALIZATION
Cash $ 3 $ 57 $ 14 $ 85 $ 58 $ 5
Bank debt 636 225 365 105 500 152 635
Senior Notes 2,717 -- 2,038 -- 600 1,025 --
Subordinated Notes 500 250 -- 120 -- 0 275
Total debt 3,855 $ 475 2,403 225 1,100 1,117 910
Equity 1,125 155 3,430 187 675 924 527
------------- ------------- -------------- ------------ ------------ ------------- --------------
TOTAL CAPITALIZATION 4,980 $ 630 $5,833 $ 412 $1,775 $2,101 $1,437
CREDIT STATISTICS
Senior secured/EBITDA 5.4x 1.9x 1.0x 1.8x 1.0x 0.1x 3.0x
Total debt/EBITDA 6.3x 5.1x 6.8x 4.1x 2.2x 3.8x 4.3x
EBITDA/Cash interest 1.6x 3.lx l.9x 2.7x 2.8x 3.5x 2.4x
EBITDA-CapEx/Cash 1.4x 2.0x 1.2x 2.1x 1.6x 2.2x 1.7x
interest
Total debt/Capitalization 77.4% 75.4% 41.0% 54.0% 62.0% 56.0% 63.3%
Equity/Capitalization 22.5% 24.6% 59.0% 45.0% 38.0% 44.0% 36.7%
TOTAL DEBT/ENTERPRISE VALUE 77.4% 75.4% 41.0% 54.0% 48.8% 39.3% 63.3%
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RECENT TRANSACTION PROFILES
CHEMICAL SECTOR (continued)
GEO
LYONDELL COMPASS SPECIALTY
($ in millions) CHEMICALS MINERALS EQUISTAR CHEMICALS IMC GLOBAL MILLENNIUM NOVEON
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BANK DEBT TERMS
Revolver $135 $500 $40 $210 $175 $125
Coupon, tenor L+350, 6.5 L+250,5 L+325, 4 L+300, 5 L+200, 5 L+300, 6
Term Loan A -- -- -- -- -- 125
Coupon, tenor -- -- -- -- -- 300.6
Term Loan B 225 300 105 290 225 510
Coupon, tenor L+350, 8.0 L+300, 6 L+375, 6 L+375, 5.5 L+250, 5 L+350, 7.5
HIGH YIELD TERMS
Type of issue Sr. Sec. Sr. Sub. Sr. Unsec. Sr. Sub. Sr. Notes Sr. Notes Sr. Sub.
Amount of issue $393 $250 $700 $120 $200, $400 $275 $275
Maturity 2008 2011 2008 2008 2011, 2008 2008 2011
11.250%,
Coupon 9.500% 10.000% 10.125% 10.125% 10.875% 9.25% 11.00%
11,625%,
Yield at issue 9.500% 10.000% 10.125% 10.125% 11.125% 9.25% 11.00%
Spread at issue 493 542 531 468 640, 590 409.5 589
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