Huntsman in $1.7 billion settlement with banks

HOUSTON (Reuters) - Huntsman Corp HUN.N will receive $1.73 billion in cash and financing under a settlement with Credit Suisse CSGN.VX and Deutsche Bank DBKGn.DE, ending a long and bitter battle over the collapse of a $6.5 billion buyout of the chemical company.

Huntsman shares initially fell as much as 12.6 percent as investors reacted with disappointment to the settlement. The shares later pared those losses and were down 2.8 percent at $5.53 on the New York Stock Exchange.

Attorneys for Huntsman had been seeking nearly $14 billion in damages from the Wall Street banks in a trial under way in state court in Conroe, Texas.

The banks were lenders in a 2007 buyout of Huntsman led by private equity firm Apollo Management LP APOLO.UL. The deal fell apart in 2008 as Apollo and the banks backed out, claiming the transaction would create an insolvent company as the U.S. economy deteriorated.

“It sounds like the banks perceived that they had some meaningful jeopardy here,” said Joel Greenberg, co-chair of law firm Kaye Scholer’s corporate and finance department.

Greenberg said the settlement was clearly a cautionary note for banks, who need to be very careful about how they behave if a deal looks like it is going to crater in the future.

Huntsman was seen to have an edge in the trial, which pitted high-powered Wall Street bankers against a family-run company with deep roots in Texas.

“I think we’ve done very well here,” Peter Huntsman, the company’s chief executive, said in a telephone interview. “I would challenge anyone to find a company that has done better than all the companies that have been left at the altar in the last two or three years.”


Under the settlement, also announced by the banks in Europe, Credit Suisse and Deutsche Bank will pay $316 million each. Each will also provide $550 million of senior debt financing to a Huntsman subsidiary, to be repaid over seven years.

“We thought that we had a very good shot at winning the case because we had been successful in picking an unbiased jury,” said Irv Terrell, a lawyer for the banks. “But it became apparent to us during the course of discussions with Huntsman that we could manage our risk in a favorable way.”

Peter Huntsman was the company’s lead witness during the trial that started last week. During his testimony, Huntsman maintained frequent eye contact with the jury of eight women and four men, and took pains to explain complex financial terms.

The buyout, struck in July 2007, was one of the last big deals signed in an era when credit was readily available to private equity firms.

When the global credit crisis hit, Deutsche Bank and Credit Suisse were unable to syndicate the deal’s hefty debt load.

Huntsman later sued to complete the sale to Apollo. Huntsman won that lawsuit and later agreed to settle with Apollo for $1 billion.

Huntsman, whose operational headquarters is in Woodlands, Texas, said it expects to use the proceeds from the settlement to pay down debt and pay its dividend.

The company, like others in the sector, has been hit hard by last year’s spike in crude oil prices and the global recession that hurt industrial demand for its products.

Additional reporting by Sam Cage in Zurich and Mike Erman in New York; Editing by Hans Peters, Matthew Lewis and John Wallace