Vita's restructuring was relatively simple from a legal point of view, as it just involved European rules. But Lyondell Chemical's bankruptcy filing last month under the US Chapter 11 process seems to have thrown up some very complex legal issues. This is because it involves two different sets of bond-holders - those who bought the European debt issued to fund the original Basell purchase from Shell/BASF in 2005, and those who bought LyondellBasell debt in 2007 to fund the Lyondell purchase.
The Lyondell Chemical Chapter 11 filing had also included 1 German subsidiary. According to today's Financial Times, this was to enable the new 'Debtor in Possession' funding (raised as part of the US process) to be used to "service the European debt while the restructuring took place". However, the rules governing European and US restructurings are quite different, and the FT quotes one lawyer who argues that some European creditors do not want companies to "stretch the reach of Chapter 11 to European companies".
The FT says the issue could lead to a battle over jurisdiction between US and European courts. At the moment, Lyondell has "secured a temporary injunction against a group of European creditors to prevent them from enforcing their claims, as it feared this could push the European business into insolvency". But the creditors are contesting the injunction, on the grounds that "the Chapter 11 filing is an event of default under the terms of the bonds in question".
Now the US courts will have to decide on Monday whether to make the injunction more long-lasting. The legal wrangling is potentially very serious, as Lyondell has also told the court that "the potential loss of control to a foreign liquidator would be disastrous to the debtors' reorganisation efforts".
Update 27 February. Al Greenwood reported last night for ICIS news that the temporary injunction has been extended by the bankruptcy court to give 60 days protection to LBI.