Princeton Economics Group, Inc.

Huntsman Corporation reached agreement with Credit Suisse and Deutsche Bank to settle Huntsman's claims and end the ongoing trial against them in Texas state court for fraud and tortious interference in connection with Huntsman's terminated merger agreements with Basell and Hexion Specialty Chemicals, Inc.

Huntsman had sued Credit Suisse and Deutsche Bank in state court in Conroe, Texas, claiming, among other things, that the banks had engaged in fraud and tortiously interfered with the merger agreement between Huntsman and Hexion. Huntsman also claimed that Credit Suisse and Deutsche Bank has conspired with rival banks to fix the terms on which financing would be provided on the Hexion-Huntsman deal and other private equity transactions. In particular, Huntsman claimed that the defendants conspired with other banks to renege on prospective commitments to bear syndication risk on contracts to fund private equity transactions. Syndication risk refers to the risk that institutions lending to private equity borrowers will not be able to syndicate or sell the borrower's debt to other investors without incurring a loss.

PEG was retained by Cravath, Swaine, & Moore LLP, counsel for the two banks, to evaluate Huntsman's allegation that Credit Suisse and Deutsche Bank conspired with other financial institutions to form a cartel. Working with Julie A. North, Michael T. Reynolds, and Omid H. Nasab of Cravath, PEG Senior Economist Andrew E. Abere and his team reviewed the available evidence and assisted PEG Senior Economist Peter Bronsteen in drafting an expert report on the cartel allegations. In his report, Dr. Bronsteen concluded that the cartel alleged by Huntsman was implausible for at least three reasons. It would not suppress competition, it would not increase the conspirators' profits over time, and it would not make economic sense for the cartel members to agree to renege on prospective commitments rather than avoid making those commitments in the first place.

Six days into trial, Huntsman settled its claims. The terms of the settlement are far below the amounts Huntsman had sought at trial. Huntsman had asked the Texas jury to award $4.65 billion in compensatory damages plus another $9.3 billion in punitive damages. Under the terms of the settlement, Credit Suisse and Deutsche Bank will each pay $316 million in cash. In addition, the two banks will each provide $550 million of senior debt financing to Huntsman International LLC, a subsidiary of Huntsman, to be repaid over seven years with interest. Under the settlement, Huntsman is recovering less than 14% of its claimed compensatory damages. Had the merger closed as scheduled in October 2008 and the banks provided the $15.35 billion of merger financing under their commitment letter, the banks' estimated losses on the financing would have been approximately $4 billion per bank, or approximately $8 billion in total.