Lyondell creditors want fair evaluation of RIL bid

Demand a court-appointed examiner.

Lyondell Chemical Co’s unsecured creditors want a court-appointed examiner to investigate how the chemical maker is evaluating a bid from Reliance Industries.

A fair evaluation of the Reliance bid is important because it’s the only alternative financing Lyondell can accept without paying a $50 million termination fee to sponsors of a proposed rights offering, creditors said yesterday in documents filed in the Manhattan federal court supervising Lyondell’s bankruptcy.

An independent examiner’s probe is also needed to evaluate “adequate protection” payments to Lyondell’s secured lenders, which are based on an earlier $19.2-billion value for the company, the committee representing unsecured creditors said. That value is much higher than the $14.5-billion value given in the latest reorganisation plan.

“Nothing that is presently before the court will ensure fairness, openness, and transparency in the debtors’ actions in connection with the Reliance proposal, or offers from other investors,” lawyers for the creditors wrote.

Jack Williams, the court-appointed examiner in the case and a managing director at BDO Seidman LLP, already submitted a 137-page report on December 22 that covered issues such as the selection of the rights offering sponsors and the company’s $8 billion bankruptcy loan.

Len Blavatnik’s Access Industries Holdings LLC, Apollo Management LP, and Ares Corporate Opportunities Fund III are the investors backing a plan that includes an offering of equity in reorganised Lyondell to compete with the bid from Mumbai-based Reliance, India’s biggest company. The so-called rights offering gives current investors the chance to buy additional stock.

Creditor suit
Two of the three sponsors have indicated that they wouldn’t support a reorganisation plan for the company unless a lawsuit brought by unsecured creditors against secured lenders is first resolved, according to court documents.

Lyondell, based in Houston, was formed in a 2007 deal financed with $22 billion in debt in which it was bought by Basell AF, a unit of Blavatnik’s Access Industries. Creditors have alleged the buyout crippled one of the world’s largest polymer, petrochemical, and fuel companies, causing it to seek bankruptcy. The company wants to settle the lawsuit on behalf of the creditors. The creditors have objected.

The examiner’s report needn’t be expanded, Access said in court documents filed January 8. Lawyers for Access called the motion “simply harassment”, and based on an assumption that Access and Blavatnik have unduly influenced the company’s decision making.

Having the examiner add to his report would be “wasteful and duplicative”, as the report has already exonerated Access and Blavatnik from “bad faith” allegations made by the committee, lawyers for Access wrote.