Huntsman gets $1.7B settlement

Huntsman Corp. said Tuesday that two investment banks will pay it a $1.7 billion settlement over its accusation that they schemed to scuttle a $6.5 billion buyout of the chemicals maker last year.

The agreement with Switzerland's Credit Suisse and Germany's Deutsche Bank ends a trial in a Texas state court on fraud charges. Huntsman — based in Salt Lake City and operated from The Woodlands, Texas, in suburban Houston — had been seeking up to $4.6 billion in compensatory damages.

The parties had been in court as recently as Thursday. Peter Huntsman, Huntsman Corp.'s president and chief executive, said the parties had been in discussions over an out-of-court settlement for about a month.

The settlement will give Huntsman Corp. a cash infusion and access to financing at a time when chemical producers are struggling with weak sales linked to the recession.

"This is the biggest change to our balance sheet we've ever had in the history of company," Huntsman told the Deseret News.

The banks will pay Huntsman Corp. $620 million in cash and provide $500 million in senior-debt financing, $600 million in unsecured-note financing and $12 million in legal costs. "This will allow us to pay down more expensive debt," because the interest rates are cheaper, Huntsman said.

The company received the cash Tuesday. The money for the settlement will be split evenly between the banks. The loans will save Huntsman Corp. money because the interest rate is lower and will give the company more liquidity, he said.

The money will help the company pay dividends to shareholders. Shareholders can expect a dividend of 40 cents per share this year, the same as they received last year.

"That's an 8 percent dividend, which in today's market, that's extremely rich," Huntsman said.

Although Huntsman Corp. had sued the banks for more than $4 billion, Huntsman said the settlement was favorable to the company since it was a risk to ask for a large settlement in front of judges in Texas, who tend to be conservative-leaning. Even if Huntsman Corp. had won the lawsuit, "you don't get a check for $4 billion in victory," he said, because parties tend to appeal. "It takes years and years."

Huntsman claimed the banks worked behind the scenes to renegotiate a funding agreement with Hexion Specialty Chemicals' owner, the private equity firm Apollo Management.