HOUSTON (Reuters) – Huntsman Corp (HUN.N) reached a $1.73 billion settlement with Credit Suisse (CSGN.VX) and Deutsche Bank (DBKGn.DE) on Tuesday, ending a long and bitter battle over the 2008 collapse of a $6.5 billion buyout of the chemical company.
Still, Huntsman shares fell as much as 12.6 percent as investors reacted with disappointment to the settlement. The shares later pared losses to trade down 2.7 percent at $5.85 on the New York Stock Exchange on Tuesday afternoon.
The case had been on trial in a state court in Conroe, Texas, where attorneys for Huntsman were seeking nearly $14 billion in damages from the Wall Street banks.
The banks were lenders in a 2007 buyout led by private equity firm Apollo Management LP APOLO.UL that fell apart after Apollo and the banks backed out of the deal, claiming it would create an insolvent company as the U.S. economy deteriorated.
Under terms of the settlement, Credit Suisse and Deutsche Bank said they would pay $316 million each. They will also each provide $550 million of senior debt financing to a Huntsman subsidiary, to be repaid over seven years.
“We thought that we had a very good shot at winning the case because we had been successful in picking an unbiased jury,” said Irv Terrell, a lawyer for the banks. “But it became apparent to us that during the course of discussions with Huntsman that we could manage our risk in a favorable way.”
Huntsman was seen to have an edge in the trial, which pitted high-powered Wall Street bankers against a family-run company with deep roots in Texas.
“This settlement with the banks marks a very successful conclusion to this litigation for the company and all of its stakeholders,” Peter Huntsman, the company’s chief financial officer, said in a statement.
The buyout, struck in July 2007, was one of the last big deals signed in an era where credit was readily available to private equity firms.
When the global credit crisis hit, Deutsche Bank and Credit Suisse were unable to syndicate the deal’s hefty debt load.
Huntsman later sued to complete the sale to Apollo. Huntsman won that lawsuit and later agreed to settle with Apollo for $1 billion.
Huntsman, which has its operational headquarters in Woodlands, Texas, said it expects to use the proceeds from the settlement to pay down debt.
(Additional reporting by Sam Cage in Zurich; Editing by Hans Peters, editing by Matthew Lewis)