Huntsman gets $1.7B settlement from banks
Huntsman receives $1.7 billion legal settlement, ending dispute with banks over buyout
By John Porretto, AP Energy Writer
On Tuesday June 23, 2009, 2:46 pm EDT


THE WOODLANDS, Texas (AP) -- Huntsman Corp. said Tuesday two investment banks will pay it a $1.7 billion settlement over its accusation they schemed to scuttle a $6.5 billion buyout of the chemicals maker last year.

The agreement with Switzerland's Credit Suisse and Germany's Deutsche Bank ends a trial in Texas state court on fraud charges. Huntsman, based in Salt Lake City but operated from suburban Houston, was seeking up to $4.6 billion in compensatory damages.

The settlement will give Huntsman a cash infusion and access to financing at a time when chemical producers are struggling with weak sales linked to the recession.

The banks will pay Huntsman $620 million in cash and provide $500 million in senior-debt financing, $600 million in unsecured note financing and $12 million in legal costs.

Huntsman claimed the banks worked behind the scenes to renegotiate a funding agreement with Hexion Specialty Chemicals' owner, the private equity firm Apollo Management.

Hexion had agreed to buy Huntsman in July 2007 for $6.5 billion, with Credit Suisse and Deutsche Bank providing the financing. Hexion began backpedaling last summer and Apollo pushed in court to have the agreement canceled, citing Huntsman's deteriorating finances.

A Delaware judge ordered Apollo to try to close the deal anyway, but Credit Suisse and Deutsche bank said they wouldn't fund it. The two chemical companies parted ways and Huntsman received a $1 billion settlement.

Huntsman, still rattled by the recession and falling sales, then sued the banks in Texas, citing interference with its business.

The case is among the last few major lawsuits to come to a close after a frenzy of proposed buyouts collapsed. The value of the targeted companies plummeted as credit markets ground to a halt and the government stepped in to rescue U.S. banking giants.

Legal teams on Wall Street have monitored developments in the Huntsman case to see if a jury would accept the justification of financial institutions like Credit Suisse and Deutsche Bank for backing out of major financing agreements.

"This settlement with the banks marks a very successful conclusion to this litigation," Peter Huntsman, the company's president and CEO, said in a statement.

Huntsman noted that with its $1 billion settlement with Hexion and Apollo in December, total proceeds exceed $2.7 billion. Peter Huntsman said money from Tuesday's settlement will be used to pay off debt and enhance the company's liquidity.

In a joint statement, the two banks said even though they "believe strongly in the merits of our case," they felt it was in their best interests to settle.

Huntsman shares fell 22 cents, or 3.7 percent, to $5.81 in afternoon trading. Deutsche Bank's U.S.-traded shares rose $1.28, or 2.3 percent, to $57.03, while Credit Suisse shares gained 93 cents, or 2.2 percent, to $42.87.