Lyondell reaches new milestone in US bankruptcy case

11 March 2010 22:05  [Source: ICIS news]

A Lyondell siteHOUSTON (ICIS news)--A US court approved on Thursday Lyondell's $450m (€329m) partial settlement with creditors and its equity offering, two key steps in the company's strategy to emerge from Chapter 11 bankruptcy protection later this year.

The partial settlement is connected to the company's merger with Basell.

A committee representing unsecured creditors had sued Lyondell’s corporate parent, Access Industries, as well as the lenders and directors associated with the merger.

The unsecured creditors committee accused them of pursuing the merger only to pocket millions of dollars in fees. The committee alleged that the merger drove Lyondell to file for Chapter 11 bankruptcy protection.

The settlement dismisses only the lenders from the lawsuit, so the creditor committee could still pursue the directors and managers.

Lyondell had said that the lenders must be dismissed from the lawsuit before it can emerge from bankruptcy protection. Otherwise, had the trial taken place against the lenders, it could have lasted for weeks, costing Lyondell tens of millions of dollars.

In addition to approving the settlement, the court also approved Lyondell's equity offering, another key part of the company's strategy to emerge from bankruptcy protection.

Under the equity offering, Lyondell would convert about $18bn of senior and bridge-loan debt into class A shares in the company.

In addition, Lyondell would sell nearly 264m class B shares, representing $2.55bn.

Another 24m shares - representing $250m - would be purchased by three firms backstopping the equity offering.

Those firms are LeverageSource, an affiliate of Apollo Management; LBI Investment, an affiliate of Access Industries; and Ares Corporate Opportunities Fund III, an affiliate of Ares Management. 

By backstopping the offering, the three firms have agreed to purchase any unsold shares.

Specifically, Apollo is committed to purchase up to $1.5bn in shares; Access is committed to buy up to $806m; and Ares is committed to buy up to $476m.

Ultimately, Lyondell plans to have its shares listed on the New York Stock Exchange (NYSE).

Lyondell is still waiting for the court to approve its disclosure statement, a document that creditors use to decide whether they will support or oppose the company's reorganisation plan.

If the disclosure statement is approved, Lyondell could then solicit support among creditors for its reorganisation plan.

Lyondell has a 15 April deadline to gather enough support for the plan, according to court documents.

With enough support, Lyondell can present the plan to the bankruptcy court for confirmation. Lyondell has a 20 May deadline for the court to confirm its plan, according to the terms of the company's bankruptcy financing.

With the plan confirmed, Lyondell could then emerge from bankruptcy protection.

($1 = €0.73)

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By: Al Greenwood
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