Creditors of bankrupt Lyondell Chemical Co asked a US judge on Wednesday to expand an investigation by a court-appointed examiner to ensure the petrochemicals company is fairly evaluating proposals from potential suitors.
Lyondell's official committee of unsecured creditors said the examiner should ensure that potential bidders like Reliance Industries have a chance to compete against a reorganization plan offered by a group of the company's senior creditors, which includes current owner Access Industries and private investment firms Ares Management and Apollo Management LP.
Reliance Industries has offered up to $12 billion to acquire Lyondell, according to sources.
Lyondell's unsecured creditors said in court papers they believe Reliance's offer is superior to the one proposed by Access, Ares and Apollo.
In the court document, the creditors said the senior lenders, Access, Ares and Apollo have "threatened to block" confirmation of any reorganization plan that does not meet their requirements, and were using their "influence to deter proposals from strategic investors."
Spokesmen for Access and Apollo declined to comment and a representative for Ares was not immediately available.
The unsecured creditors also questioned the propriety of $440 million of "adequate protection" payments made to the company's senior lenders since the company filed for bankruptcy in January. They argued the examiner should investigate why Lyondell is paying the money, which cannot be recovered.
"We are progressing toward emergence from bankruptcy protection and we are doing so in a fair and independent manner," Lyondell spokesman David Harpole said in a statement.
"We believe that assertions to the contrary are ill-founded and inconsistent with the interests of all stakeholders."
EXAMINER'S REPORT
Lyondell is a US unit of LyondellBasell, which filed for bankruptcy protection after being unable to meet its debt obligations when demand dropped for petrochemical products during the global economic downturn.
LyondellBasell, a Luxembourg-based holding company, is owned by investor Len Blavatnik through New York-based Access Industries. Lyondell took on billions of dollars of debt when Access Industries led a 2007 buyout of the petrochemicals company.
The unsecured creditors have argued that the deal set the company up to fail and sued the banks and advisers responsible for putting the deal together.
In October, US Bankruptcy Judge Robert Gerber approved the appointment of Georgia State University law professor Jack F. Williams as an examiner and he released his report earlier this week, court documents showed.
The examiner was ordered to only look into certain issues, such as the company's debtor-in-possession financing arrangements.
In his report, Williams said Stephen Cooper, who is vice chairman of LyondellBasell's supervisory board and chairman of its restructuring committee, may face "conflicting demands" as he tries to restructure the company and also deal with litigation from creditors.
Lyondell's "governance structure is sound in theory ... However, to some extent in practice, the governance structure starts to erode," Williams wrote in his report.
"The examiner found that the corporate governance processes in place at LyondellBasell are working appropriately to assure that LyondellBasell is making decisions with respect to our reorganization consistent with our fiduciary duties," Lyondell spokesman Harpole said.
Lyondell had hoped to emerge from bankruptcy protection by the end of 2009 but recently extended its bankruptcy financing and is now looking at an exit sometime in 2010. Earlier this month it requested that the court extend its exclusive right to come up with a reorganization plan to September 2010.
Lyondell also, earlier this month, settled the lawsuit filed by its unsecured creditors, but the creditors have challenged the validity of the settlement and may ask the examiner to look into it. Under bankruptcy law, Lyondell controlled the right to settle the suit brought by the unsecured creditors .
The court is expected to hear the creditors' request on Jan. 12.
The case is In re: Lyondell Chemical Co., US Bankruptcy Court, Southern District of New York, No. 09-10023.
Source: Economic Times
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