A previous version of this story gave an incorrect figure for the damages Huntsman was seeking. The story has been corrected.

SAN FRANCISCO (MarketWatch) -- Credit Suisse Group and Deutsche Bank AG said Tuesday that they agreed to pay $632 million to Huntsman Corp. to settle a lawsuit accusing the investment banks of fraud and intentionally meddling in two acquisitions that failed.

Credit Suisse (CS) and Deutsche Bank (DB) are each paying Huntsman (HUN) $310 million in cash and another $6 million each to reimburse the company for litigation costs.

The banks are also lending Huntsman $500 million for seven years. The senior, secured loan has an interest rate that's 2.25% over the London interbank offered rate, or Libor -- a common benchmark for borrowing costs. Huntsman said it also gets a $600 million unsecured loan for seven years at 5.5%.

Shares of Huntsman fell 4.3% to $5.75 during afternoon trading on Tuesday. Credit Suisse and Deutsche Bank both climbed more than 2%.

"Equity holders appear displeased with the settlement, as they may have been hoping that their holdings of Huntsman would result in a lottery ticket (the company had mentioned that they would consider returning a portion of the proceeds from litigation to shareholders)," Timothy Doherty, a credit analyst at KDP Investment Advisors, wrote in a note to clients.

However, the settlement is positive for creditors because if eases near-term liquidity pressure on the chemicals company, he added.

Huntsman was seeking $4.65 billion in damages, alleging the banks failed to fund a takeover of Huntsman by Hexion Specialty Chemicals, a unit of private-equity firm Apollo Management LP. Another deal with Dutch chemicals company Basell also fell through.

Huntsman's suit, which accused Credit Suisse and Deutsche Bank of fraud and tortious interference, had gone to trial in Texas state court. The settlement ends all litigation between the banks and Huntsman.


"While we believe strongly in the merits of our case, we felt it was in our best interests to resolve the litigation for $316 million each," the banks said in a statement. "We are pleased to have the litigation behind us."

The Huntsman deals were one of the highest-profile casualties of the financial crisis, which brought the availability of debt for big leveraged buyouts to an abrupt halt in 2007. The LBO market has yet to recover from the blow.

Huntsman said Tuesday that it has collected more than $2.7 billion from litigation in the wake of the failed deals. That includes a $1 billion settlement with Hexion and Apollo in December 2008, the company noted.

The money from Credit Suisse and Deutsche Bank will be used to repay certain of Huntsman's outstanding indebtedness and further enhance the company's liquidity, the company added.

Huntsman also said it plans to continue to pay its quarterly dividend of 10 cents a share.

"This settlement with the banks marks a very successful conclusion to this litigation for the company and all of its stakeholders," Peter Huntsman, chief executive of Huntsman, said in a statement. "The financing offers us a much lower average cost of borrowing and extends the maturities of our borrowings, such that the earliest meaningful maturity is July 2012. We are well positioned to prosper as we move forward past this concern."

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