MUCH IN PIPELINE - Reliance Industries Ltd

In a boost to its bid to acquire troubled petrochem firm LyondellBasell Industries, Reliance Industries Ltd (RIL) has got support from the official, court-recognized committee of unsecured creditors.


The committee, which represents the interests of a large number of creditors, has urged the court to allow it to directly work with potential investors, including RIL, to arrive at a deal to rescue the company. The committee, in a filing before the bankruptcy court of New York handling the issue, expressed fear that the LyondellBasell management may not give due consideration to the RIL proposal and urged the court to let it work out a parallel plan along with RIL and others.


It pointed out that the interest of a potential investor such as RIL may not be compatible with those of the institutional investors already suggested as possible rescuers by the management.


This committee of unsecured creditors has opposed the plan suggested by management, worrying about the huge "haircut" they will have to take. The court will take up the matter before 15 December, the date on which emergency loans taken by the company after bankruptcy come up for repayment.


According to US bankruptcy laws, the court has the final decision to approve or disapprove any reorganization plan. However, in the initial stages, the court allows the company to come up with a plan. It is then put to vote by different classes of creditors.


The plan can then be vetoed by a substantial group of creditors.


However, the court can exercise its powers to force a reorganization plan if the creditors fail to agree on one. We maintain a buy on RIL, with a target price of Rs1,170.


Source: Live Mint
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