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.)