Hexion Sues Two Big Banks | Chemical & Engineering News
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Web Date: November 4, 2008

Hexion Sues Two Big Banks

Hexion gets a date for its lawsuit against banks for failing to back the Huntsman acquisition
Department: Business

A New York Supreme Court judge has set the date of Jan. 8, 2009, to commence the trial in Hexion Specialty Chemicals' lawsuit against the two banks contracted to finance its $10.6 billion acquisition of Huntsman Corp. The judge also denied Hexion's request to extend the expiration date of the financing agreement beyond Nov. 1.

Hexion, which calls the denial "procedural," is suing Credit Suisse and Deutsche Bank for breach of contract. It is asking the court to force the banks to provide $15.35 billion in financing so it can complete the deal.

The banks rejected an opinion of an independent valuation firm, American Appraisal, and documents from Huntsman attesting to the combined company's financial strength (C&EN, Nov. 3, page 11). They refused to provide financing when the deal was scheduled to close on Oct. 28, "apparently having decided that the transaction is no longer financially advantageous to them," Hexion???s suit says.

Hexion itself had been looking for a way out of the merger, and a September lawsuit against Huntsman in the Delaware Court of Chancery might have allowed it to do that. However, that court ordered Hexion to fulfill its contractual obligations under its merger agreement with Huntsman or face substantial liabilities.

In its suit against the banks, Hexion acknowledged its earlier opposition to the merger. It had argued that deterioration in Huntsman???s business since the merger was signed in July 2007 created a gap between the amount of money committed and what would actually be needed to complete the deal. Hexion also said the deal would make the combined company insolvent.

Now Hexion says everything's changed. Some $1.4 billion in additional equity from Huntsman and Hexion shareholders will shore up the new company???s books, it says. Also, declining oil prices and the weakening euro have improved Huntsman???s performance, the company says.

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