Huntsman claims it can deliver solvency opinion in proposed merger with Hexion

By Lisa Kerner

Charlotte, N.C., Sept. 12 - Huntsman Corp. said it intends to deliver a solvency opinion from a "reputable valuation firm" in connection with the closing of its merger with Hexion Specialty Chemicals, Inc.

In a Sept. 12 letter to Hexion, Huntsman said American Appraisal would issue a written opinion that a combined Huntsman/Hexion entity would be solvent.

Huntsman said it expects to engage American Appraisal to deliver an opinion "at the appropriate time." American Appraisal was retained by Huntsman counsel in July, the letter said.

The company expects Credit Suisse and Deutsche Bank AG, New York Branch will honor their obligations under their commitment letter to provide financing for the merger, if a solvency opinion is delivered.

Huntsman reminded Hexion that there is no solvency condition to its covenant to use its reasonable best efforts to close the merger, according to the letter.

Hexion, in a statement, said "it is clear Huntsman does not have a solvency certificate."

"We note the peculiar timing of the announcement in view of Huntsman's request for an expedited trial and the fact that the firm they reference was retained two months ago," Hexion said.

Hexion filed a motion in early July asking the Court of Chancery of the State of Delaware to determine that the company is not obligated to consummate the merger.

On Sept. 11, Huntsman accepted two backstop proposals each of which included the Huntsman family. Hexion conditionally consented to Huntsman's acceptance of the proposals.

Huntsman stockholders agreed make cash payments to the company in an aggregate amount of $416.46 million to facilitate the merger's close.

The stockholders will receive no equity, debt or other securities or payments in return for their payments.

Huntsman said the stockholders' obligations to make payments are conditioned on the merger closing under the current agreement on or before Nov. 2, according to a form 8-K filed with the SEC.

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.

In June, Hexion said the capital structure agreed to for the combined company is no longer viable and that completing the merger would render the combined company insolvent. The company blamed Huntsman's increased net debt and its lower-than-expected earnings and declined to extend 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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