Hexion manufactured solvency issue - Huntsman

25 September 2008 21:08  [Source: ICIS news]

NEW YORK (ICIS news)--Hexion Specialty Chemicals and private equity owner Apollo Management “manufactured a solvency issue” to break its agreement to acquire Huntsman, Huntsman contended in its post-trial brief filed on Thursday with the US Securities and Exchange Commission (SEC).

The trial involving the US-based companies’ busted $10.6bn (€7.2bn) concluded on 16 September.

The court had indicated that a decision would be made before 2 October.

Hexion had “manufactured a solvency issue, even though solvency is not a condition to Hexion’s obligation to close,” Huntsman said.

Instead of working with Huntsman to resolve any concerns, Hexion used the alleged solvency issues to “destroy the financing” for the merger, Huntsman said.

The financing commitment letter from Credit Suisse and Deutsche Bank did require the delivery of a solvency certificate from Huntsman’s chief financial officer or a reputable third-party valuation firm - something Huntsman was prepared to do, the company said.

Before Hexion presented the banks with an insolvency opinion from valuation firm Duff & Phelps, “Deutsche Bank was already in the process of syndicating the loan,” Huntsman claimed.

“The court saw the gross overreaching in which plaintiffs indulged in their litigation-crafted efforts to ‘prove’ insolvency. Plaintiffs’ concoction of $390m in pension contributions and the dramatic and arbitrary changes to the projections in their pre-litigation versus post-litigation business models are but two of many examples,” stated Huntsman.

Huntsman charged that Hexion also inflated the cost of closing the merger by saying it was required to pay owner Apollo a $100m management fee at closing.

“With arrogant cynicism, plaintiffs believe they can manipulate a court into allowing them to escape their covenants on spurious grounds. Justice will not permit it,” stated Huntsman.

($1 = €0.68)

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By: Joseph Chang
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