Hexion Inc. is a specialty chemical company. It has a complicated, high-yield debt structure, consisting of first lien debt (loans and bonds), secured bonds, second lien bonds, and senior unsecured debt, due to a series of mergers as well as a leveraged buyout in 2005. Exhibit 18 is a simplified depiction of the company’s debt structure, as well as some key credit-related statistics.

Using the information provided, address the following:

1. Calculate gross leverage, as measured by debt/EBITDA, through each level of debt, including total debt.

2. Calculate the net leverage, as measured by (Debt − Cash)/EBITDA, for the total debt structure.

Transcribed Image Text:

EXHIBIT 18 Hexion Inc. Debt and Leverage Structure as of Year-End 2017 Financial Information ($ millions) Cash Total debt Net debt Interest expense EBITDA Debt Structure ($ millions) First lien debt (loans and bonds) Secured bonds Second lien bonds Senior unsecured bonds TOTAL DEBT $115 $3,668 $3,553 $329 $365 $2,607 $225 $574 $263 $3,669