Banks win decision in Huntsman deal

NEW YORK — Shares of specialty chemicals company Huntsman plunged Friday after a judge denied a request to extend a funding commitment from banks trying to back out of a $6.5 billion takeover bid.

The stock dropped $3.55, or 26 percent, to close at $10.10. The stock has dropped 61 percent this year.

The ruling allowed a commitment letter, which detailed how Credit Suisse Group AG and Deutsche Bank AG would fund Hexion Specialty Chemicals Inc.'s acquisition of Huntsman, to expire today.

Hexion had sued Credit Suisse and Deutsche Bank on Wednesday, after the banks rejected an appraisal saying the combined company could remain solvent in the current economic climate.

The buyout had been slated to close Tuesday.

State Supreme Court Justice Eileen Bransten in Manhattan disagreed with Hexion's claim that it would suffer "irreparable harm" if Credit Suisse and Deutsche Bank didn't leave the funding agreement in place beyond today's deadline.

Credit Suisse and Deutsche Bank said in a joint statement they are "gratified by this decision" and will "continue to defend ourselves vigorously."

Hexion, controlled by New York private-equity firm Apollo Global Management LLC, is locked in a legal battle over its acquisition of chemical maker Huntsman, which is based in Salt Lake City and has its administrative headquarters in The Woodlands, Texas. The banks' refusal to fund the July 2007 deal, which was announced before the credit freeze and looming U.S. recession, has led the group to consider a new transaction at a price less than the original $28 a share.

Hexion believes it may be able to force the banks to fund the Huntsman deal even after the expiration date, Bransten said, citing Marc Kasowitz, a Hexion lawyer.

"All of the time Hexion could have moved, could have done things well in advance of the Nov. 1, 2008, deadline," Bransten said Friday following a hearing. "If Hexion had done so, it would have eliminated the urgency to do something today."

The banks notified Columbus, Ohio-based Hexion of their decision on Monday, the company said in a statement. Credit Suisse, based in Zurich, and Deutsche Bank, of Frankfurt, rejected a solvency opinion by American Appraisal Associates Inc. and a certificate signed by Huntsman's chief financial officer.

Apollo, the New York-based private-equity firm run by Leon Black and Joshua Harris, initially made a similar argument about the combined company's finances. Huntsman sued Hexion in June in Delaware Chancery Court to meet the terms of their takeover agreement.