Banks deny Hexion's request for alternate financing to fund Huntsman merger

By Lisa Kerner

Charlotte, N.C., July 3 - Affiliates of Credit Suisse and Deutsche Bank AG declined Hexion Specialty Chemicals, Inc.'s request for alternate financing proposals in connection with its merger agreement with Huntsman Corp., it was reported in a form 8-K filed by Hexion with the Securities and Exchange Commission.

Hexion said it asked Huntsman to allow it to seek alternative financing through one or more third-party financial institutions.

Huntsman approved Hexion's request under the condition that Hexion comply with the existing commitment letter and obtain an executed confidentiality agreement, according to a form 8-K filed by Huntsman with the SEC.

In a July 3 letter to Hexion included in the filing, Huntsman said that if Hexion believes there is an insolvency or funding gap impediment to closing the merger under the existing commitment letter, then Hexion should seek additional financing, including equity financing from a third party under Hexion's reasonable best efforts obligation.

On July 12, 2007, Hexion agreed to acquire Huntsman in an all-cash transaction valued at approximately $10.6 billion, including the assumption of debt. Huntsman shareholders approved the deal in October 2007.

On July 2, Huntsman announced it would exercise its right to extend the merger agreement to Oct. 2.

It was previously reported that Hexion had gone to court to declare its contractual rights under the agreement, alleging that the agreed-upon capital structure for the combined company is no longer viable because of Huntsman's increased net debt and its lower-than-expected earnings, it was previously reported.

Hexion had doubted that Credit Suisse and Deutsche Bank can be provided with a reasonably satisfactory solvency opinion or certificate, a condition of their financing commitments.

According to Huntsman, it is possible to provide Hexion's lenders with assurance of solvency and to declare that no material adverse effect has occurred under the merger agreement.

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

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