Solutia, a chemical company in St. Louis with nearly USD3 billion in sales last year, is considering entering an interest-rate swap on the back of a high-yield bond it plans to issue in the next few months. Kevin Wilson, treasurer, said the size of the bond offering has yet to be decided, but predicted it would be no larger than USD300-400 million.
If the company enters the swap it will be the first interest-rate swap for Solutia in five years. The company's last swap came following a USD600 million bond offering in 1997, which is the last bond offering the company has issued. "We hedged that issuance and we've been in discussions about undertaking a similar plan for this one," Wilson said. In the swap, the chemical company would look to it receive a fixed-rate equal to the coupon on the bond and pay a floating-rate.
Wilson said the company hasn't determined if it would enter a swap covering the entire proceeds from the offering or just a portion.
The decision will depend on the ratio between Solutia's fixed and floating-rate debt at the time of the offering. The current mix is about 50/50. "We have a pretty good mix right now," Wilson noted.
The company plans to use the proceeds to pay off a portion of USD500 million in bank loan debt He declined to name possible counterparties, but said it would not be unlikely for Solutia to use the same firm that leads the bond offering and include the swap as an all-in-one deal. "I've seen them pitched like that before," Wilson noted. Moody's Investors Service has placed a Ba1 rating on Solutia's debt, one notch below investment grade.
