Huntsman Corporation 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated June 22, 2009, details a material definitive agreement entered into by Huntsman Corporation and its subsidiary, Huntsman International LLC. The filing addresses the resolution of litigation related to the failed 2007 merger agreement with Hexion Specialty Chemicals, Inc.
Key Financial Metrics and Transaction Details
The settlement resulted in an aggregate payment of $1.73 billion to the Company on June 23, 2009. The components of this settlement are as follows:
- Cash Payment: $620 million paid directly to the Company.
- Note Purchase: $600 million aggregate principal amount of 5.5% Senior Notes due 2016 purchased by the Defendants (Credit Suisse and Deutsche Bank).
- Term Loan Financing: $500 million in additional senior secured term loan financing provided to Huntsman International LLC.
- Cost Reimbursement: $12 million reimbursed for litigation costs.
The new Senior Notes bear interest at 5.5% per year, payable semi-annually, maturing on June 30, 2016. The new Term Loan bears interest at the prime rate plus 1.25% or LIBOR plus 2.25%, also maturing on June 30, 2016.
Material Changes and Litigation Resolution
Upon full payment, the Company and the Defendants agreed to dismiss with prejudice the lawsuit filed in the Ninth District Court of Montgomery, Texas. This settlement resolves claims related to the Agreement and Plan of Merger dated July 12, 2007. The filing clarifies that Apollo Management LLC, a party to a separate settlement, is not entitled to any portion of these proceeds as their contingent interest expired when the trial commenced.
Outlook, Risks, and Covenants
The Note Purchase Agreement imposes significant covenants on Huntsman International LLC and its subsidiaries, including limitations on:
- Incurring additional indebtedness.
- Paying dividends or making restricted payments.
- Entering into transactions with affiliates.
- Merging, consolidating, or disposing of substantially all assets.
The Term Loan is subject to existing covenants under the senior secured credit facilities. The Company has entered into a Registration Rights Agreement to facilitate the future trading of the Notes if they are not freely tradable within 366 days.
Investor Verification Checklist
- Verify the exact timing of the $1.73 billion receipt and its classification on the balance sheet (cash vs. debt extinguishment vs. new debt).
- Review the specific financial covenants in the existing credit facilities that now apply to the new $500 million Term Loan.
- Confirm the impact of the $600 million note purchase on the Company's total debt load and interest expense coverage.
- Assess the implications of the dismissal of the Texas lawsuit on any remaining contingent liabilities.
- Check the terms of the Voting Agreement to understand lender influence on future amendments to credit facilities.