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Huntsman-Hexion Deal Off Again

Banks that were to finance merger deal won't provide loans to make it happen

by Alexander H. Tullo
November 3, 2008 | APPEARED IN VOLUME 86, ISSUE 44

CREDIT SUISSE and Deutsche Bank have scuttled Hexion Specialty Chemicals' attempt to close its $10.6 billion acquisition of Huntsman Corp. on Oct. 28.

The banks told the two companies they would not provide the necessary loans because they deemed the solvency certificate provided by Huntsman Chief Financial Officer J. Kimo Esplin and the solvency opinion retained from the independent financial evaluation firm American Appraisal unsatisfactory. These documents assert that the combined company would be able to pay its debts.

Hexion has been seeking a way out of the deal since June, when it filed suit in the Delaware Court of Chancery arguing that deterioration in Huntsman's performance would make the combined companies insolvent. Huntsman won court backing for the deal in September in that suit and has also received rulings in Texas against the two financing banks, preventing them from filing suits alleging insolvency.

By denying the financing, the banks are rejecting the American Appraisal opinion that the merged companies would, as Huntsman has described it, satisfy "solvency tests commonly used in transactions of this nature." Huntsman points out that Credit Suisse has testified that it would provide financing as long as it received an "independent opinion in which no reasonable lender, acting in good faith, could object."

Following the banks' decision, Hexion filed a lawsuit in New York City against Deutsche Bank and Credit Suisse asking the court to compel them to fund the merger. "Both Hexion and Huntsman are ready, willing, and able to complete the merger immediately but have been prevented from doing so by the banks' breach," Hexion CEO Craig O. Morrison said in a statement.

Should the merger fail to close, Apollo and the banks face a trial in Texas, set to begin in February, in which Huntsman is seeking more than $3 billion in damages.



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