Dow Chemical

(DOW) - Get Report

is willing to miss its contractual deadline to close on its acquisition of

Rohm & Haas


on Jan. 10 in order to lower the deal's debt costs, according to a published report.

Dow CEO Andrew Liveris said in an interview with the

Financial Times

that the penalty Dow will pay Rohm & Haas if the deadline is missed "is not a huge amount of money," and "will not be a big deal."



also reported that Liveris intends to raise more equity before it closes on Rohm, thereby reducing the debt Dow would incur if it completed the merger under today's financial requirements.

Liveris has reportedly assembled more than $13 billion in debt financing from more than 15 different banks in order to pay for the Rohm acquisition and other operating costs. Dow's tap into the credit market had long been treated like an emergency fund that it would probably never need to touch. That changed suddenly on Dec. 28, when its Kuwaiti state-backed JV partner

Petrochemical Industries

announced that it was backing out of the partnership.

Dow Chemical was to make more than $7 billion from the Kuwaiti venture. Most would have gone toward its purchase of Rohm & Haas. Dow had to move its rainy-day credit line into a more accessible position for covering day-to-day expenses.

A Credit Suisse analyst said on Tuesday that Dow is almost surely trying to negotiate a lower price for Rohm & Haas. This could be the motivation behind Dow's decision to ignore the Jan. 10 deadline in its contract with Rohm.

While it is true that additional equity financing would reduce Dow's future debt burden, equity almost always has a higher cost of capital than debt financing does. A better way to improve the underlying fundamentals of the Rohm and Haas acquisition would be for Dow to reduce the size of the check it must write to Rohm's shareholders.