With Reliance rejected, Lyondell can pursue exit plan

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HOUSTON (ICIS news)–LyondellBasell has rejected Reliance Industries’s latest takeover bid after concluding it was “not higher and better” than its current reorganisation plan in which private-equity firms would play important roles in the company’s emergence from bankruptcy protection, the global polymer giant said in a court filing on Monday.

LyondellBasell’s management board and independent supervisory board said that after having analysed the Indian energy major’s most recent proposal, they felt it was not, “sufficiently valuable to abandon” its amended reorganisation plan.

Reliance increased its offer for LyondellBasell to nearly $15bn (€11bn) from $13.5bn on 21 February. The new offer came with stock and cash options for shareholders and creditors, based on media reports.

“The proposal…did not assure a higher overall value for LyondellBasell than that upon which the [reorganisation] plan is based; it continued to provide Reliance with effective control over LyondellBasell, even if it owned only minority position and did not pay a premium,” LyondellBasell said in its court filing.

“It [Reliance] did not put any Reliance assets at risk should a transaction be pursued and fail,” LyondellBasell added.

With Reliance’s offer being rejected, Lyondell is on track to emerge from bankruptcy protection later this year, based on deadlines outlined in court documents.

As early as Thursday, the court could hold crucial hearings regarding the approval of Lyondell’s equity offering and its disclosure statement. The disclosure statement is used by creditors to determine whether they will support or oppose the company’s reorganisation plan.

In addition, the disclosure statement provides details about Lyondell’s equity offering, a key part of its reorganisation plan.

Under the plan, 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. Any unsold shares would be purchased by the three firms sponsoring the offering: LeverageSource, an affiliate of Apollo Management; LBI Investment, an affiliate of Access Industries; and Ares Corporate Opportunites Fund III, an affiliate of Ares Management. 

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

The same three firms would also purchase nearly 24m additional class B shares, representing another $250m.

Another critical portion of Lyondell’s exit strategy involves a $450m deal to partially settle a lawsuit connected to its 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 proposed settlement would dismiss only the lenders from the lawsuit, so the creditor committee could still pursue the directors and managers.

The court has scheduled a hearing on Thursday to approve the settlement.

If Lyondell receives approval for the settlement and the disclosure statement, it would ultimately seek to have the court confirm its reorganisation plan.

Lyondell has a 20 May deadline for confirmation, according to the terms of its bankruptcy financing.

($1 = €0.73)

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