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Lyondell Settlement Paves Way For Bankruptcy Exit

17.02.2010 -

Lyondellbasell said it has reached a settlement with creditors over a lawsuit stemming from its 2007 leveraged buyout, paving the way for the chemical maker to get out of bankruptcy. Lyondell, which was forced into bankruptcy just over a year ago amid a cash crisis, has been sparring with creditors for months over a $22 billion lawsuit the creditors brought against the banks, advisers and executives who put together Lyondell's leveraged buyout by Basell in 2007.

The creditors claimed the buyout set the company up to fail by loading it up with too much debt, and disputed the validity of a $300 million settlement agreement of the lawsuit that Lyondell said it reached in December.

Lyondell said it now has support from unsecured creditors for a $450 million settlement that will let it come up with a reorganization plan and emerge from Chapter 11.

"The parties have worked very hard over the last several weeks. We believe this provides a clear path to emergence from Chapter 11," George Davis, an attorney at Cadwalader, Wickersham & Taft representing Lyondell, said in U.S. bankruptcy court in Manhattan.

He said that the company's balance sheet problems and "intercreditor disputes" had "stood in the way of emergence."

The settlement is subject to court approval but would entitle the company's general unsecured creditors and holders of its "Millennium Bonds" and 2015 notes to a $450 million distribution when the company exits bankruptcy, up from $300 million proposed in the earlier settlement in December.

Lyondell said the additional $150 million will be distributed as equity in the reorganized company. The settlement has the support of senior lenders. Ed Weisfelner, a lawyer with Brown Rudnick, which represents unsecured creditors, said at the hearing on Tuesday he hopes the settlement will usher in "a new era of cooperation" among "previously warring parties."

Planning An Exit
Lyondell would like to be able to keep its target of emerging from bankruptcy protection at the end of April, Davis told the court on Tuesday.

The maker of petrochemicals has been planning to exit court protection under a deal that would give ownership of most of the reorganized company to its secured lenders, including investment firms Apollo Management, Ares Management and a unit of billionaire Len Blavatnik's Access Industries. Access led the 2007 buyout of U.S. chemical company Lyondell, creating the Luxembourg-based holding company, LyondellBasell.

India's Reliance Industries has said it is interested in purchasing the company and has offered a deal that would value the company at about $13.5 billion, a source familiar with the matter said last month. Lyondell said, however, it will continue with its plan. Reliance may now be forced to raise its offer or abandon its bid all together.

"We will continue to work with all parties to design a confirmable plan of reorganization that maximizes the value for our creditors while improving the financial stability for the reorganized company," Lyondell spokesman David Harpole said in a statement on Tuesday.

"Any alternative plan would require a third party to submit a definitively higher and better offer that maximizes the value for our creditors and is in the best interests of our estate."

The judge scheduled a March 1 hearing to discuss approval of the settlement but told the court he would also keep March 8 open in his schedule in case parties needed extra time to reach agreement on any contested portion of the proposals.

 

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