Investors are worrying BCP Caylux Holdings Luxembourg, a holding company for German chemical concern Celanese AG, plans to issue a bond and use the proceeds to pay a dividend to The Blackstone Group. BCP Caylux's $1.2 billion June issue was sold with loose covenant protection at a time when the market was hot. "There are no covenants to stop them from doing anything," said one portfolio manager.
Other credits are also at risk because recent high-yield deals have lacked covenant protection given strong investor demand. John Rogers, the lead chemicals analyst at Moody's Investors Service, fielded several calls this week from investors concerned about the potential dividend deal. It could not be determined why the speculation is growing now. "There are rumors going around the holding company will issue a note that is reliant on dividends from BCP Caylux Holdings," he explained.
Blackstone Capital Partners, an arm of the private equity giant, is the parent of BCP Caylux Holdings. "Blackstone has never been shy about being opportunistic," said one chemicals analyst at a major bank. John Ford, spokesman for Blackstone, did not return a call by press time.
BCP Caylux Holdings' 9 5/8% of '14s dropped two points to around 108 by the middle of last week. Banc of America Securities, Deutsche Bank and Morgan Stanley underwrote the sale this summer. Calls to high-yield bankers and spokesmen at the three firms were not returned by press time.
"There's a lot of latitude in the indentures, and covenants aren't going to stop them from doing anything," Rogers added. Rogers said as long as the deal is small, or around $100 million, its ratings would not be impacted. But he noted until the potential dividend deal is quantified, he couldn't say how it will affect the holding company's ratings.
Another chemicals analyst said Blackstone's move to issue holding company notes would be opportunistic. Blackstone did a similar deal for chemical company Nalco shortly after taking the company private, so buy- and sell-side analysts concurred the move would be consistent with the company's previous actions. The analyst said another potential use of proceeds--which would also be seen as unfavorable by bondholders--would be to buy the portion of Celanese stock outstanding, which would cost around $375 million.
