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Posted 21 Dec 2001   For week ended December 21, 2001
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News about Mormons, Mormonism,
and the LDS Church
Sent on Mormon-News: 20Dec01
By Kent Larsen
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Huntsman to Delay Purchase of ICI Stake Says Reuters

SALT LAKE CITY, UTAH -- Billionaire Mormon businessman Jon M. Huntsman is expected to announce this week a new deal, says Reuters, with Britain's Imperial Chemical Industries Plc (ICI) that will delay the planned buyout of ICI's 30% stake in Huntsman International. The delay, expected to be for at least a year, highlights the weakness in the commodity chemicals industry and in Huntsman's financial position, trouble that led Huntsman Corporation, which owns the billionaire's North American operations, to drop two interest payments and watch its bond ratings drop into S&P's cellar.

The Belgium-based joint venture, Huntsman International, was formed when Huntsman agreed to acquire ICI's commodity chemicals businesses in April 1998 for $2.8 billion, allowing ICI to get out of commodity chemicals and focust solely on the higher profit specialty chemicals business. But financing for the deal left the companies in a joint venture owned 70% by Huntsman and 30% by ICI, which also held an option to sell its stake to Huntsman. ICI exercised that option in October.

However, the recent economic downturn has caught Huntsman in a financially difficult situation, and one that left it unable to pay for ICI's stake. Commodity chemicals are sensitive to the business cycle, so the downturn means sales of Huntsman's products have slumped. In August Forbes Magazine reported that Huntsman was "in a very tight spot," because of the slump and the amount of long-term debt the company was carrying because of acquisitions.

The situation led credit rating firm Standard and Poors to downgrade Huntsman's debt repeatedly. Huntsman also had to hire restructuring shop Dresdner Kleinwort Wasserstein to negotiate with creditors, and then early this month Huntsman announced it would miss interest payments on corporate bonds due December 3rd and January 1st, leading S&P to drop Huntsman's rating to just one step above S&P's lowest.

Meanwhile, Huntsman had tried to get financing to purchase the ICI stake earlier this year through venture capital firms Blackstone Group and Bain Capital (run by LDS Church member Mitt Romney before he became head of the Salt Lake Organizing Committee). But Huntsman's financial troubles led the two firms to pull out of the deal. The company eventually was able to get $150 million in financing in late November, but the lender's wouldn't allow the funds to be used for interest payments.

Reuters claims that the new deal with ICI will include significant incentives to keep it in the partnership for at least another year -- until the economy improves. "Huntsman can't be doing acquisitions with its current capital structure," Huntsman executive vice president Sam Scruggs told Reuters in an interview. This means, he said, Huntsman and ICI "will be partners longer." The terms of the deal aren't yet known, but Scruggs says "we have cut a deal that ICI thinks is better than the alternatives."

But Huntsman spokesman Don Olsen says that the purchase will eventually happen, "We're definitely going to acquire Imperial Chemical's interest," he said. "It is just a matter of when that will happen and what the price will be."

And while Huntsman is in a bind -- Fitch, Inc. analyst Omar Jama says Huntsman can't even raise cash by selling assets because "There is no market for assets in the chemical business" right now -- Huntsman's creditors are in a still tighter spot, "Even if they could force the company into bankruptcy, what is that going to achieve?" Jama points out. "All they can do is exercise some forbearance and wait to get their money back."


MERGER TALK - Huntsman scraps plans to buy out ICI venture
IWon (Reuters) 17Dec01 B4
By Dane Hamilton


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