Huntsman, Banks Settle Lawsuit
July 1, 2009
The struggle between Huntsman Corp. and the two banks that committed to fund the merger between the Texas-based chemical company and Apollo Management’s Hexion Specialty Chemicals has come to an end.
Huntsman and the two banks—Credit Suisse and Deutsche Bank—have agreed on a settlement worth $1.7 billion.
Under the deal, Credit Suisse and Deutsche Bank have agreed to provide Huntsman $620 million in cash, $500 million in a secured term loan at Libor plus 250 bps, $600 million in unsecured notes at 5.5% and $12 million for litigation costs. Huntsman will use the proceeds from this settlement to repay existing debt, boost its liquidity and eliminate operating losses due to taxes.
Huntsman began pursuing the lawsuit against the two banks in May, claiming that the banks committed common law fraud in connection with the 2007 deal with Dutch chemical company Basell, as well as civil conspiracy, negligent misrepresentation and tortuous interference with the Hexion agreement.
The merger between Huntsman and Hexion was struck in July 2007 but was repeatedly delayed from closing. In June 2008, Hexion tried to walk away, claiming that the merger would create an insolvent company and that Huntsman had suffered a “material adverse effect” since the agreement. After a court battle that took place in Texas and Delaware, a Delaware judge ordered Apollo’s Hexion to complete the merger. But then the two banks backed out of the deal, also claiming that the combined company would be insolvent.
“This is a very successful conclusion to this litigation for the company and all of its stakeholders,” Peter Huntsman, Huntsman’s CEO said in a statement.
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