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Lyondell Wins OK Of Big Bankruptcy Creditor Pact

12.03.2010 -

LyondellBasell on Thursday won court approval for a $450 million settlement to resolve litigation with creditors over its 2007 leveraged buyout, and pave the way for the big chemical company to emerge from bankruptcy.

Lyondell said in February that it had gained support from its unsecured creditors for the settlement, which increases the amount these creditors could recover. In exchange, the creditors agreed to drop a $22 billion lawsuit against the banks, advisers and executives who put together Lyondell's leveraged buyout by Basell, alleging that the transaction effectively set the company up to fail.

"The settlement is overwhelmingly in the best interests of the estate," Judge Robert Gerber said at a hearing in Manhattan bankruptcy court. He overruled two objections to the accord, including one by oil company ConocoPhillips.

Lyondell is hoping to emerge from bankruptcy this year.

The settlement could end months of sparring, including intercreditor litigation that Gerber said "paralyzed" the company's ability to exit bankruptcy. It also has the support of bondholder trustees.

"You can see the negotiation fatigue I think on the faces of every lawyer in this courtroom," George Davis, a lawyer for Lyondell, said at the beginning of the hearing.

Private Equity, Blavatnik
Lyondell filed for bankruptcy in January 2009 as it suddenly faced a cash crisis under the weight of billions in debt, and amid a decline in global demand for petrochemicals because of the recession. Earlier this week, Lyondell rejected a takeover bid from India's Reliance Industries that valued the company at $14.5 billion. It said it will seek court approval to submit its own reorganization plan for a creditor vote.

According to a disclosure statement filed on Monday, private equity firms Apollo Management LP and Ares Management, along with the holding company Access Industries, have agreed to back a $2.8 billion rights offering under which Lyondell would issue 263.9 million Class B shares.

The investor, Len Blavatnik, led the 2007 buyout through Access, which is based in New York. He will seek a stake of as much as 15% in a reorganized Lyondell, a person familiar with the matter said on Wednesday.

In addition to overruling ConocoPhillips' objection to the settlement, Gerber also overruled an objection by what he called a "splinter" group of bridge loan debt purchasers. He accused both of trying to "cherry-pick" what they did not like, while reserving their ability to avail themselves of parts of any bankruptcy resolution that they prefer.

Gerber said ConocoPhillips at best might raise its objection to confirmation of Lyondell's reorganization plan, not the settlement.

Lyondell plans to list new shares on the New York Stock Exchange after it emerges from bankruptcy.

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