Bankers Trust is expected to lead about $550 million of bank financing for Huntsman Corp.'s planned purchase of Texaco Chemical Co. for $1.06 billion.

The acquisition agreement between Huntsman and Texaco was disclosed late Monday afternoon.

Hunstman Corp. is a 50-50 joint venture of Jon M. Huntsman of Salt Lake City, Utah. and Australian investor Kerry Packer.

Close Ties

Mr. Huntsman is a Bankers Trust director, and he is also said to have close personal ties to Charles S. Sanford Jr., chairman of Bankers Trust New York Corp., and a fellow graduate of the Wharton School of the University of Pennsylvania.

A Bankers Trust official refused to comment on any aspect Texaco Chemical deal, including how it will be financed.

But a source outside the bank said there was a verbal understanding that Bankers Trust would lead the bank financing, and that the bank and Huntsman are completing the terms of a formal commitment letter.

Deal Structure

The source confirmed a report in Tuesday's editions of The New York Times that about 55% of the $1.06 billion purchase price will be financed with bank loans.

While the exact capital structure of the deal has not been finalized, it will also include a sizeable equity investment by Mr. Huntsman and Mr. Packer, and some other form of debt financing, the source said.

Mr. Huntsman was out of his office Tuesday, and could not be reached for comment.

The Texaco Chemical operations appear to make a good fit with Mr. Huntsman's 60%-owned Huntsman Chemical Corp., the largest privately owned chemical company in the United States.

Prolonged Slump

Among other commodity chemicals, the Texaco unit makes propylene, which is a raw material for Huntsman Chemical's major product, polypropylene.

The commodity chemical business has been in a prolonged slump, and the Texaco unit posted an operating loss for the first half of this year.

But the Texaco unit will look "a lot different" under Huntsman, because of cost savings and synergies that will improve its financial performance, a source said.

Still, the new Huntsman loan will likely have the flavor of a below-investment-grade credit, based on interest coverage and other criteria, the same source added.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.