Lyondell creditors file fraud suit against leveraged buyout of the company by Basell in 2007

The official committee of creditors for bankrupt petrochemicals maker Lyondell Chemical Co has filed a lawsuit seeking to recover US$22 billion from the banks, advisers and executives who arranged the 2007 leveraged buyout of the company by Basell. The judge overseeing the case said it would proceed on an accelerated time frame, so that Lyondell can still try to meet its goal of emerging from Chapter 11 by the end of the year. In the suit, filed in U.S. Bankruptcy Court in Manhattan, the company's unsecured creditors' committee claimed the 2007 buyout, led by Russian-American billionaire Len Blavatnik and his New York-based company Access Industries, set up LyondellBasell to fail. The creditors claimed that the company's January 2009 Chapter 11 filing in New York was "the entirely foreseeable and direct consequence of the merger having left (the LyondellBasell companies) with unreasonably small capital for the continuation of their businesses." In the lawsuit, the creditors claimed that the 2007 merger was "essentially a gamble" because the company's petrochemical business was known to be cyclical and could not consistently support such a heavy debt load. The committee claimed the $48 per share purchase price paid to Lyondell shareholders was "excessive" and was made to prevent other competitive bids for Lyondell, which was the third-largest petrochemicals maker in the United States at the time. The creditors are suing investment banks CitibankGoldman Sachs Group Inc, Deutsche Bank , ABN Amro Bank NV, UBS Securities, and Merrill Lynch for helping to arrange the deal, as well as investors in the deal like Barclays Global Investors, Perella Weinberg Partners and LeverageSource, controlled by private equity firm Apollo Management, which is one of Lyondell's largest investors. The suit named 74 defendants in total, including Access and Blavatnik, as well as many of Lyondell's key managers and board of directors. The creditors are seeking a jury trial that will prove as many as 21 different claims against the defendants for fraudulent transfer, breach of contract, breach of fiduciary and mismanagement. Representatives for Citi, Merrill, Goldman, ABN Amro, Barclays Global, Leveragesource, and Perella Weinberg were not immediately available for comment. Deutsche Bank declined to comment and a UBS spokesman had no immediate comment.
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