LyondellBasell shielded from creditors seeking millions

10 February 2009 20:43  [Source: ICIS news]

HOUSTON (ICIS news)--A US bankruptcy court has issued a temporary restraining order in favour of LyondellBasell Industries, shielding it and its solvent companies from creditors trying to collect on roughly $1bn (€770m) in notes and over $125m in debts covered by guaranties, the company said on Tuesday.

LyondellBasell is a holding company, and many of its subsidiaries filed for bankruptcy protection in the US. Under the filing, the subsidiary Lyondell Chemical became the lead debtor.

Although the subsidiaries filed for bankruptcy, the holding company itself remained solvent - as well as some of its business units.

Those solvent companies had issued guaranties for some of the debts of the bankrupt units, Lyondell Chemical said in court documents. Those guaranties cover well over $125m in debts.

A US bankruptcy court issued a temporary restraining order, preventing creditors from trying to collect on the debts covered by those guaranties.

In requesting the order, Lyondell Chemical argued that any action against the holding company would essentially be one against the bankrupt units. As a result, the actions would interfere with the units' ability to reorganise their finances.

"The relief sought by the debtors is critical to the debtors' ability to preserve the assets and value of the debtors' global enterprise," the company said.

The temporary restraining order also covered the notes, of which one batch is worth $615m and another batch is worth €500m, Lyondell Chemical said. A bankruptcy could trigger a default on those notes, allowing the holders to request the payment of the debt.

Before requesting the payment, the note holders must organise into a group, in which the members represent at least 25% of the value of the notes, the company said. Lyondell Chemical accused some of the note holders of trying to organise such a group.

If those note holders were successful, the holding company could become insolvent, Lyondell Chemical said.

Insolvency could then allow a trustee to wrest control of the company's management, Lyondell Chemical said. "The consequences for the debtors would be severe, immediate and irreparable."

Indeed, a default under the notes would trigger another default concerning the company's bankruptcy financing - commonly known as debtor-in-possession (DIP) financing, Lyondell Chemical said.

Such a DIP default would be a disaster, terminating any further borrowing and accelerating the payment of all existing loans, Lyondell Chemical said. Under such circumstances, the companies would liquidate.

Another hearing about the guaranties and notes is scheduled for 13 February, Lyondell Chemical said.

($1 = €0.77)

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By: Al Greenwood
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