RIL eyes Lyondell co-promotership

Raises Rs 9,300 cr through treasury stock sale

Reliance Industries Ltd (RIL) is wooing the LyondellBasell management, especially Russian promoter Leonid Blavatnik, to become co-promoter in the bankrupt Dutch chemical company.

Sources close to the developments said the gameplan for RIL was to either partner the Lyondell management in the reorganisation, or offer funds to the promoters to repay their debt, probably after the firm got out of bankruptcy.

RIL has raised over Rs 9,300 crore from sale of treasury stock.

The bankruptcy court in New York will reopen its hearing on Lyondell’s reorganisation plan tomorrow. The management’s new plan has got “substantial creditor support”, though unsecured creditors favour RIL’s acquisition plans.

“At the hearing tomorrow, the Lyondell management is expected to ask for time till September to submit its final plan with suggestions from the creditors. If the court allows time, RIL could work out its supportive plan jointly with the management. If not, the company will prefer a partnership with the promoters after the firm emerges from bankruptcy protection,” said two executives close to the developments.

RIL sweetened its offer last week, valuing Lyondell at $13.5 billion, up from $12 billion in an initial offer disclosed in November. Under the proposal, RIL would buy $2.25 billion in new stock and support a separate $2.8 billion stock sale to take Lyondell out of bankruptcy.

RIL has raised over Rs 9,300 crore from three treasury stock sales to support its acquisition plans. The company, after its transaction today, said it had raised Rs 3,465 crore through sale of 33 million shares held by the Petroleum Trust. That’s a 4.8 per cent discount to the closing price on January 8. After the transaction, RIL shares fell on the Bombay Stock Exchange and closed 1.85 per cent down at Rs 1,081.55. UBS was the sole manager for the deal.

Also, RIL has Rs 19,421 crore in its books as cash and cash equivalent to support the deal. However, bankers close to the development said the company would not withdraw much of its reserve as the debt burden could dent its books. RIL has a debt of Rs 71,349 crore at the end of September quarter.

Despite all the financial groundwork by RIL, bankrupt Lyondell on December 24 said it had reached a settlement with a majority of its creditors to exit the bankruptcy protection. The Dutch chemical giant has $28 billion debt on its books. The creditors who together held $18 billion debt, supported the reorganisation plan of the management.

“The RIL team appointed for Lyondell deal held several rounds of discussions with the promoter, creditors and other management members. The final plan will be clear by tomorrow. If the management sticks to its earlier reorganisation plan, RIL will be out of the race,” the sources said.

Under the Lyondell reorganisation plan, the firm will issue fresh shares worth $2.8 billion to the creditors in the post-bankruptcy company. Investors, including Apollo Management, Ares Management and Lyondell’s owner firm Access Industries of Blavatnik plan to “backstop” a $2.8-billion stock sale to take the company out of Chapter 11, buying up shares which others have stayed away from. The new plan guarantees shares equal to their debt in the company.