Thinking about this further, however, if Huntsman owns Hexion, the credit is a lot better and of course Hexion is not in bankruptcy, I mentioned on Thursday that giving Hexion to Huntsman may be frowned on by the bondholders. Milestone will be the temporary restraining order hearing on Oct. But ultimately the dynamics still point rationally to a settlement, and Hexion needs just a short-term win to push Huntsman there. There are still many moving parts that are about to move a lot more quickly. The Texas action, while potentially facing off in a New York courtroom. So I would expect Apollo and Hexion to move quickly to knock out They may try to contest other claims, but they are potentially on the hook for financing here. However, the banks know the risks as much as Apollo does. This is a risk that no doubt looms large again. Here, the action is in Texas – and there are some salacious facts alleged thereĪnd possibly enough to send the matter to trial, at least against Apollo. The question is whether Huntsman wants to play. Ultimately, this should put Hexion, Apollo and the banks in a negotiating mood. Only makes getting the banks to fund that much harder. Having been found in breach of the merger agreement and subject to uncapped damages, any further deterioration in the combined Hexion and Huntsman business Before the banks’ and Hexion’s and Apollo’s interests were previously aligned now they are not.Īnother factor is time, which doesn’t help Hexion anymore. But the commitment letter only requires a certificate, and if it is reasonably delivered the banks should be out

The banks will challenge this, of course, and want to examine the underlying particulars of solvency. If it does not, then it will likely try and draw on the financing in New York,Ĭiting the solvency certificate which Huntsman is willing to provide. In this scenario much will be signaled by whether Hexion decides to appeal.

Of Hexion and is subjected to possible liability from a bankruptcy trustee and creditors in bankruptcy, including with respect to fraudulence conveyance actions in light of the dividends Hexion has paid to ApolloĪdded to this mix is the low probability of success in Delaware. It makes the insolvency calculus much more complex and less appetizing. The big difference here is the existence of another big source of financing – in the form of Apollo. In that case, Finish Line’s loss on its material adverse change caseįorced it to litigate against UBS to obtain the necessary funds to complete the acquisition. In essence, we are seeing the Genesco– Finish Line– UBS dispute play out again. For more on this, see this post by Elizabeth Nowicki. Of course, right now this figure needs to be risk-adjusted for any ultimate judgment though it clearly is trending up after Vice Chancellor Get out of litigating in Texas and New York with a similar billion dollar loss. Then Apollo gets out of litigating with its investors as to who’s at fault for a $4 to $5 billion judgment in Texas or who has to contribute to a $2-$3 billion settlement in which Hexion is lost. Price above $20, Apollo invests equity in Hexion and the banks fund with a reduced loss. By “deal,” I mean Hexion owns Huntsman at a reasonable In the optimal negotiation outcome for all parties, a deal gets done where everyone takes a hit except the personal assets of Mr. Someone at Apollo has been rereading them this week. The Apollo management’s calculus is defined by the scope of these governance documents, and no doubt And the private equityįirm wants to avoid litigating with its own limited partners and a very messy finger-pointing exercise. The opinion in the Delaware case is no doubt hanging over their heads. Harris, are defendants in a Texas lawsuit subject to liability. Right now, Apollo, as well as top executives Mr. These documents would set forth the scope of the fiduciary duties of the Apollo management company (and Leon Black and Josh Harris) to the Apollo investment funds and more importantly the relationships on indemnificationĪnd contribution between the Apollo management and the Apollo funds involved in the Hexion and Huntsman buyouts. If I could view any documents related to the Huntsman– Hexion dispute, at the top of my list would be the governance documents of the Apollo Management investment

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