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After Hexion Specialty Chemicals Inc. and its owner, Apollo Management LP, were body slammed on Monday by a Delaware Chancery Court, arbitrageurs and others have been handicapping the possible outcomes. On Thursday, Moody's Investors Service floated an intriguing possibility: Huntsman Corp., the target of the original deal, might end up buying Hexion.
The court's ruling Monday that Hexion "knowingly and intentionally" breached its $10.5 billion agreement to buy Huntsman potentially exposed Hexion to $3.8 billion or so in liability to Huntsman. Hexion simply is not good for that. It had only $151 million of cash as of June 30 and $3.6 billion of debt already, and any settlement payment would probably violate its debt covenants, according to Moody's. Unless Hexion and Apollo can strike some kind of deal with their lenders, Credit Suisse Group and Deutsche Bank AG, to fund the original takeover at a price agreeable to Huntsman, Huntsman might press forward in court on the damages claim and, if it won, force Hexion into selling out to Huntsman for stock. In that event, "Huntsman could receive equity in Hexion or Hexion could be merged into Huntsman with Apollo receiving some stock in the combined company," the Thursday Moody's report said. That would allow Apollo to salvage something from an investment that otherwise might go bankrupt, and without having to invest more equity, as it likely would have to do if it and Hexion went forward with the purchase of Huntsman. - John E. Morris Judge rules against Apollo, Hexion in Huntsman buyout John Morris is a senior private equity writer for The Deal. CategoriesComments
From: Jeff A.,
I think the author's point was that if the deal does not go through, Hexion's damages owed to HUN will be so high that HUN will actually end up "owning" Hexion... With the new pledge from Apollo of $540M to help get the deal done, do you still think it might go through? http://www.stockdata.org/2008/10/15/huntsman-deal-back-on/
Posted on:
October 15, 2008 3:09 PM
From: Jeff A.,
wow, looks like this might actually happen after all, based on Hexion's inability to get this thing funded...
Posted on:
November 5, 2008 4:10 PM
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There is so much that's wrong with this article it's hard to know where to start. To begin with, The Huntsman's are looking to sell, not acquire (Sr. wants to donate his fortune to his cancer institute). He is a man of principle and would never stand for "Apollo getting some equity" for hexion after all that's transpired.The Huntsman's would likely proceed with the Texas suit, get a huge judgement from Black and Harris and assist Citadel and Shaw in privatizing the company