Hexion takes bank affiliates to court for failure to fund merger with Huntsman

By Lisa Kerner

Charlotte, N.C., Oct. 29 - Hexion Specialty Chemicals, Inc. took its case against affiliates of Credit Suisse and Deutsche Bank to the Supreme Court of the State of New York after the banks failed to fund the closing of Hexion's merger with Huntsman Corp.

According to Hexion, the banks breached their obligations under the financing commitment letter.

"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 chairman and chief executive officer Craig Morrison said in a company news release.

"We are seeking judicial relief to compel the banks to fund the merger as required by their commitment letter and we intend to pursue this action vigorously."

Hexion and Huntsman had planned to complete their merger Tuesday.

It was previously reported that counsel to the banks' affiliates did not believe that the solvency opinion of American Appraisal Associates and the solvency certificate of Huntsman's chief financial officer met the condition of the financing commitment letter.

On Monday, Huntsman investors agreed to make an additional cash commitment of approximately $217 million and funds managed by affiliates of Apollo Management, LP agreed to make an additional cash equity investment of $210 million in Hexion to help bring the merger to a close.

Hexion agreed in July 2007 to acquire Huntsman in an all-cash transaction valued at approximately $10.6 billion. Huntsman shareholders approved the deal in October 2007.

The merger had been stalled in court after Hexion claimed the combined company would be insolvent.

In September, Hexion was ordered by the Delaware Court of Chancery to close the deal.

An appeals court awarded a temporary injunction in favor of Huntsman earlier in October, preventing the banks from filing any lawsuit that alleges that the combined company would be insolvent or would be incapable of paying off its notes to the banks.

Huntsman's claims against the banks were consolidated with the company's previously filed claims against Apollo Management, Leon Black and Joshua Harris.

A jury trial is set to begin on Feb. 9. Huntsman is seeking more than $3 billion in actual damages, plus exemplary damages, attorneys' fees and interest, Huntsman said previously.

Based in Columbus, Ohio, Hexion makes thermoset resins. Huntsman is a Salt Lake City manufacturer of differentiated chemicals and pigments.

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