EX-99.B 4 c28573_ex-b.txt Exhibit B [LOGO] HERCULES -------------------------------------------------------------------------------- HERCULES INCORPORATED Presentation to the Board of Directors December 12, 2001 [GRAPHIC] [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- AGENDA Introduction Current conditions in the debt capital markets Recent performance of Hercules' debt vs. comparables Refinancing strategies Positioning [LOGO] HERCULES 2 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- INTRODUCTION [LOGO] HERCULES 3 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 [LOGO] HERCULES 4 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- ($ 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 [LOGO] HERCULES 5 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- CURRENT CONDITIONS IN THE DEBT CAPITAL MARKETS [LOGO] HERCULES 6 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 [LOGO] HERCULES 7 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 [LOGO] HERCULES 8 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 [LOGO] HERCULES 9 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- RECENT PERFORMANCE OF HERCULES' DEBT VS. COMPARABLES [LOGO] HERCULES 10 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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. [LOGO] HERCULES 11 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- HERCULES' DEBT TRADING PERFORMANCE (continued) TERM LOAN D HERCULES TERM LOAN D TRADING PERFORMANCE -------------------------------------------------------------------------------- Graph omitted reflecting Bid Level with range of approximately 92 to 100 per $100 face value between 03/26/01 to 11/30/01 for Hercules Term Loan D. [LOGO] HERCULES 12 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- HERCULES' RELATIVE SPREADS CURRENT VS AT ISSUE RELATIVE VALUE: INSTITUTIONAL TERM LOAN VS SR. UNSECURED DEBT -------------------------------------------------------------------------------- [The following table was depicted as a bar chart in the printed materials.] [BAR CHART] [BAR CHART] AT ISSUE (11/09/00) CURRENT (12/07/01) Bond 529 Bond 550 Term loan 333 Term loan 383 AT ISSUE CURRENT ----------------------------- ----------------------------- PRICE ABSOLUTE YIELDS PRICE ABSOLUTE YIELDS Bonds 100.00 11.125% Bonds 104.00 10.21% Bank 99.75 10.02% Bank 98.25 5.81% [LOGO] HERCULES 13 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- REFINANCING STRATEGIES [LOGO] HERCULES 14 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- TRANSACTION SUMMARY SCENARIO I -- PARTIAL REFINANCING - BALANCE SHEET AS OF 09/30/01 SOURCES USES ---------------------------------- --------------------------------------- ($ 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 ---------------------------------- --------------------------------------- (1) Commitment reduced to $800 million. [LOGO] HERCULES 15 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- AVAILABLE LIQUIDITY $290 -------------------------------------------------------------------------------- [LOGO] HERCULES 16 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 2003 REFINANCING RISK Refinancing will smooth maturities while limiting refinancing risk to the Revolving Credit Facility and Notes due in 2003 [The following tables were depicted as bar charts in the printed materials.] [BAR CHART] SCHEDULED MATURITIES - PRE REFINANCING -------------------------------------------------------------------------------- ($ in millions) 2001 2002 2003 2004 2005 2006 2007 2008 $53.1 $234.2 $909.0 $3.8 $356.8 $58.0 $400.0 $0.0 [BAR CHART] SCHEDULED MATURITIES - POST REFINANCING -------------------------------------------------------------------------------- ($ 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 $389.0 [LOGO] HERCULES 17 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- PROJECTED CREDIT STATISTICS AND PROPOSED COVENANT LEVELS Immediately following a transaction, covenants would be set at 5.5x, stepping down to a level between 5.00x and 5.25x after a year ($ 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 $2,357 Total debt / EBITDA 3.93x Proposed test 5.00x EBITDA cushion 115 MINIMUM EBITDA FOR COMPLIANCE 485 [LOGO] HERCULES 18 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- TRANSACTION SUMMARY SCENARIO II - COMPREHENSIVE REFINANCING We believe that the Company could also embark upon a comprehensive refinancing SOURCES USES ------------------------------------ ------------------------------------ ($ 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 ------------------------------------ ------------------------------------ TOTAL SOURCES $1,313 TOTAL USES $1,313 ------------------------------------ ------------------------------------ [LOGO] HERCULES 19 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- POSITIONING [LOGO] HERCULES 20 [REDACTED] Presentation to Board of Directors -------------------------------------------------------------------------------- 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 [LOGO] HERCULES 21 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- APPENDIX I Chemical industry debt market conditions 1 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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% -------------------------------------------------------------------------------- CHEMICAL COMPOSITE (1.14%) 1.01% 4.60% -------------------------------------------------------------------------------- 2 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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) -------------------------------------------------------------------------------- ($ 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 $3.5 B from October 2001 to December 2001]
[BAR CHART] ANNUAL NEW ISSUE VOLUME BY RATING -------------------------------------------------------------------------------- NEW ISSUANCE ($ 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 -------------------------------------------------------------------------------- RATINGS MOODY'S S&P SPREAD OVER 5.01% TREASURY ABSOLUTE YIELD Baa3 BBB- 249 bps 7.50% -------------------------------------------------------------------------------- Bal BB+ 364 bps 8.65% Ba2 BB 437 bps 9.38% Ba3 BB- 487 bps 9.88% -------------------------------------------------------------------------------- B1 B+ 517 bps 10.18% B2 B 636 bps 11.37% B3 B- 784 bps 12.85% 3 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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) -------------------------------------------------------------------------------- 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) -------------------------------------------------------------------------------- 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 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 -------------------------------------------------------------------------------- [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 5 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 -------------------------------------------------------------------------------- [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 -------------------------------------------------------------------------------- [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 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 ------------ ---------
7 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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% 8 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 9 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRIES DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 10 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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% 11 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 12 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------------- 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. 13 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- INSTITUTIONAL LOAN TRADING LEVELS
INSTITUTIONAL TRANCHE TERM LOANS - TRADING PERFORMANCE AS OF DECEMBER 10, 2001 ---------------------------------------------------------------------------------------------------- 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% ---------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------
Note: Assumes three month LIBOR spread of 2.00%. 14 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- NON-INVESTMENT GRADE SENIOR DEBT
DATE ISSUER ISSUE AMOUNT COUPON MATURITY S&P/Moody's ------------------------------------------------------------------------------------------------------------------------------------ 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. 15 [REDACTED] [LOGO] HERCULES CHEMICAL INDUSTRY DEBT MARKET CONDITIONS APPENDIX I -------------------------------------------------------- RECENT TRANSACTION PROFILES CHEMICAL SECTOR
GEO LYONDELL COMPASS SPECIALTY ($ in millions) CHEMICALS MINERALS EQUISTAR CHEMICALS IMC GLOBAL MILLENNIUM NOVEON ------------------------------------------------------------------------------------------------------------------------------------ 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 $1,437 CREDIT STATISTICS Senior secured/EBITDA 5.4x 1.9x 1.0x 1.8x 1.0x 0.1x 3.0x Total debt/EBITDA 6.3x 5.1x 6.8x 4.1x 2.2x 3.8x 4.3x EBITDA/Cash interest 1.6x 3.lx l.9x 2.7x 2.8x 3.5x 2.4x EBITDA-CapEx/Cash 1.4x 2.0x 1.2x 2.1x 1.6x 2.2x 1.7x interest Total debt/Capitalization 77.4% 75.4% 41.0% 54.0% 62.0% 56.0% 63.3% Equity/Capitalization 22.5% 24.6% 59.0% 45.0% 38.0% 44.0% 36.7% TOTAL DEBT/ENTERPRISE VALUE 77.4% 75.4% 41.0% 54.0% 48.8% 39.3% 63.3%
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GEO LYONDELL COMPASS SPECIALTY ($ in millions) CHEMICALS MINERALS EQUISTAR CHEMICALS IMC GLOBAL MILLENNIUM NOVEON ------------------------------------------------------------------------------------------------------------------------------ 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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