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By Kent Larsen
Forbes Reports Huntsman in 'A Very Tight Spot'
SALT LAKE CITY, UTAH -- The August 6th issue of Forbes Magazine reports that
LDS billionaire Jon M. Huntsman is in a "very tight spot" because of
long-term debt taken on to finance acquisitions. The company has had to sell
some assets and take on minority investment in order to meet the interest
payments on its debt. The company has also recently cut back, dropping 700
of its 3,500 US jobs in an effort to pare costs in the face of lower prices
for its products.
The Forbes article says that Huntsman has piled up $5 billion in long-term
debt, requiring $189 million in annual interest payments. But while
Huntsman's companies have the income to meet the debt payments, the
structure of his 1999 purchase of several business lines from London-based
Imperial Chemical Industries left income from those operations unavailable
to make the interest payments.
At the time Huntsman didn't think it would have a problem meeting the debt
payments, "Huntsman Corp. was doing well, and we saw no great need to
consolidate" the new operations, now in a company called Huntsman
International, with Huntsman Corp. As part of the purchase, ICI kept a 30%
interest in Huntsman International, and required that Huntsman Corp., and
Huntsman International keep separate books, "As it turned out, that was a
mistake," says Huntsman.
But the general economic downturn has hit Huntsman Corp. hard. The company
manufactures commodity chemicals, and demand for those chemicals have
dropped, taking prices with it. Forbes also reports that cheaper products
are coming from the Middle East, where production of commodity chemicals
rose 32% last year.
In the short term, Huntsman has solved its cash crunch by selling a 20%
stake in its overall operations to Bain Capital, the Boston-based venture
capital firm founded by SLOC CEO and LDS Church member Mitt Romney, and to
Blackstone Capital Partners for $550 million. The proceeds were used for
debt service and to buy the ICI's 30% equity stake in Huntsman International.
The company's layoffs of 700 workers is a move to solve the long-term
problem by reducing costs. Huntsman Corp. shuttered a styrene plant in
Odessa, Texas earlier this year, saving about $100 million, and Forbes
reported that Huntsman is looking at other plants in Port Neches and Port
Arthur, saying "In the long term they are not a part of our portfolio."
But Huntsman Company later disputed the statement, saying that Forbes
misunderstood and denying that the plants are to be shut down, "It would be
gutting the business," said Huntsman spokesman Don Olsen, "It makes no
sense. To close those assets means to shut down the business in North
America. It would be a physical impossibility."
Nevertheless, reports in the Beaumont, Texas Enterprise worried about the
possiblity of closing the plants and reviewed their economic impact,
including the 1,335 employees at the three plants (combined payroll of $123
million) and the total of $31.8 million in local and state taxes. But the
plant's status became clearer when Huntsman announced the layoffs, which
include anywhere from 200 to 250 employees at the three Texas plants.
Sources:
Chemical Reaction
Forbes 6Aug01 B2
By David Armstrong: Forbes Magazine
Huntsman Says It Won't Idle Plants
Salt Lake Tribune 3Aug01 B4
By Dan Wallach: Knight Ridder News Service
Cutbacks at Huntsman may cost 200 jobs
Beaumont TX Enterprise 2Aug01 B4
By Dan Wallach: Beaumont Enterprise
Salt Lake City-Based Chemical Company Says No Texas Plant-Closings
Beaumont TX Enterprise 1Aug01 B4
By Dan Wallach: Beaumont Enterprise
Chemical from Plants in Jefferson County, Texas Go into Many Plastic Products
Beaumont TX Enterprise 1Aug01 B4
By Dan Wallach: Beaumont Enterprise
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