Legal News

In Day of Beginnings, New Trial Opens Over Huntsman/Apollo Mess

By Ashby Jones

Here at the Law Blog, it’s a Monday of new beginnings. We’ve moved from our longstanding digs in the Battery Park section of Manhattan up to the hustle-bustle of midtown. Today is Day One, and we’re still nervously learning our way around. One thing that put us at ease first thing, however: the big Ropes & Gray sign in the lobby. Ah, we thought. Lawyers, sweet lawyers.

It’s a day of beginning as well for the players in two high-profile and widely-anticipated lawsuits. For starters, there’s the big smackdown kicking off in Manhattan federal court. The caption may read A.I.G. v. Starr International, but for us it’s Boies v. Wells. Click here for today’s NYT story; here for our post on Friday.

And in state court down in Conroe, Texas, another big suit starts up today. Chemical-maker Huntsman squares off against Credit Suisse and Deutsche bank. Huntsman is seeking $4.65 billion in damages. It accuses the investment banks of plotting to scuttle its 2007 leveraged buyout by Hexion Specialty Chemicals, a company owned by private-equity firm Apollo Management LP. Click here for today’s WSJ curtain raiser, from erstwhile LB writer Peter Lattman.

“The banks have done nothing wrong,” said a spokesman for the two firms. “We are fully confident that we will be vindicated.” Repping the banks: Cravath’s Richard Clary and Irv Terrell of Baker Botts. For Huntsman: Robin Gibbs and Kathy Patrick at Gibbs & Bruns.

The Huntsman deal was funded entirely by $15.4 billion of newly issued debt. It collapsed 11 months later when Apollo asked a Delaware judge to cancel it, arguing that a combined Hexion-Huntsman would be insolvent and therefore didn’t meet the banks’ funding conditions.

After a six-day trial, a Delaware judge disagreed with Apollo, ruling that Hexion intentionally breached the merger pact to wriggle out of the deal. The judge ordered Apollo to use its best efforts to close the transaction. After the Delaware ruling, Huntsman, based in The Woodlands, Texas, sued the banks in state court, alleging that they also interfered with the merger.

Last December, Huntsman and Apollo reached a $1 billion settlement that included a $325 million payment from the banks. Click here for a blog post on an American Lawyer article on Wachtell Lipton’s alleged role in the Huntsman/Apollo situation.

Now Huntsman has taken aim at the banks. The company has accused Credit Suisse and Deutsche Bank of failing to fund the deal because they sought to avoid billions of dollars in losses. The banks say they didn’t provide the financing for the deal because they didn’t think a combined Hexion-Huntsman would be solvent, a requirement under the financing commitment letter.

Huntsman hopes to persuade jurors that the banks schemed with Apollo to squelch the buyout. The evidence is expected to include details of a meeting at the World Economic Forum in Davos, Switzerland, between Apollo boss Leon Black and Credit Suisse Chief Executive Brady Dougan in which the two men discussed the troubled buyout and ways to mitigate losses on the deal.

The banks are expected to argue that this conversation and others are typical interactions, nothing more than loose talk between lenders and their private-equity clients.

Full post as published by Law Blog - WSJ.com on June 15, 2009 (boomark / email).