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Hexion: No Obligation To Get Extra Funding

NEW YORK, July 25 (Reuters) – Apollo Management's Hexion Specialty Chemicals unit said on Friday it has no obligation to seek additional financing to complete its $6.5 billion acquisition of chemical maker Huntsman Corp (HUN.N: Quote, Profile, Research, Stock Buzz).

Hexion's acquisition of Huntsman has been in jeopardy since Hexion filed suit against Huntsman in June, seeking to limit its liability in the event that the deal falls apart. It said at the time that bank financing for the deal was in jeopardy due to Huntsman's current financial condition.

Hexion claims the deal, which was struck at the peak of the private equity boom last summer, is no longer feasible because of Huntsman's increased net debt. It also contends that the combined company would be insolvent if the deal proceeded under the agreed terms.

Huntsman, in a letter to Hexion dated July 24, said it was approached by potential investors offering supplemental funding to help complete the deal.

Hexion in its reply to Huntsman's letter said there is no obligation under the merger agreement to seek “additional” or “supplemental” financing.

Hexion states that its only obligation is to seek alternate financing to replace the financing provided by the commitment letter if, the financing provided by the commitment letter becomes unavailable.

A spokesman for Huntsman was not immediately available for comment.

Huntsman believes that the merged company would be solvent and that Hexion is required to complete the deal under the original terms. It has also filed suit against Hexion. (Reporting by Euan Rocha; Editing by Derek Caney)