4th UPDATE: Deutsche Bank, Credit Suisse Sell Huntsman Bonds
September 09 2009 - 4:53PM
Dow Jones News
Credit Suisse Group (CS) and Deutsche Bank AG (DB) Wednesday
sold part of their debt exposure to Huntsman International, a unit
of chemical manufacturer Huntsman Corp. (HUN), highlighting how
healing credit markets are helping banks reduce risky debt holdings
that have been clogging their balance sheets.
The two banks sold $600 million in 5.5% Huntsman International
bonds due June 30, 2016 for 80 cents on the dollar for a yield of
9.567%, according to a person familiar with the deal. The bonds are
rated B1 by Moody's Investors Service and B-minus by Standard &
Poor's.
Huntsman had originally issued the senior unsecured notes to the
two banks as part of a $1.7 billion settlement relating to the
terminated merger agreement with Apollo Management LP-owned Hexion
Specialty Chemicals Inc.
Hexion originally agreed to buy Huntsman in July 2007 for $6.5
billion. But the Huntsman buyout collapsed in June 2008 as the
credit markets soured and Apollo asked a Delaware court to rescind
the deal, arguing a combined firm would be insolvent. A judge ruled
against Apollo and ordered it to try to close the transaction.
Huntsman later sued the banks in Texas, accusing them of failing
to fund the deal because they wanted to avoid billions of dollars
in loan losses. In December, Huntsman reached a $1 billion
settlement with Apollo, which included a $250 million investment in
Huntsman by Apollo in the form of a convertible note.
As part of the settlement, Credit Suisse and Deutsche Bank
agreed to provide Huntsman with $1.73 billion in cash and
financing, including the bond issue sold Wednesday and $500 million
loan. According to Standard & Poor's LCD unit, the banks are
also in the process of selling the loan to investors.
Timothy Doherty, analyst at KDP Investment Advisors, said in a
note to clients that Huntsman's debt balance won't be affected by
the sale; rather, the cash will be realized by the two banks.
A spokesman for Huntsman Corp. wasn't available to comment on
the debt sales.
Huntsman used the proceeds of the settlement this year to repay
debt and bolster liquidity.
"The settlement is the biggest positive Huntsman has.
Operationally the company isn't doing very well, but it has plenty
of cash," said James Lee, senior fixed-income analyst at Calvert
Asset Management.
"Banks and fixed income investors love it when the company
doesn't need the money," he added.
-By Kate Haywood, Dow Jones Newswires; 212-416-2218;
kate.haywood@dowjones.com
(Peter Lattman of the Wall Street Journal contributed to this
article.)