LyondellBasell files amended reorganisation plan proposing a rights issue

15-Dec-09
LyondellBasell, which sought bankruptcy protection in January, has filed an amended Chapter 11 reorganisation plan with a U.S. court. As per this plan, the bankrupt petrochemicals major has proposed a US$2.8 bln rights issue, planning to simplify its corporate structure and exit bankruptcy protection with significantly less debt. Under the new reorganisation plan, Lyondell will pay a maximum of US$428 mln in administrative, tax and other priority claims and repay the new money portion of its DIP loan in full, except excluded DIP obligations. During the bankruptcy the firm put together one of the largest debtor-in-possession bankruptcy loans in history during a glut in the credit markets. Investors who put in US$3.25 billion of new money into its bankruptcy loan were also allowed to "roll up" existing senior-secured debt into the loan for the same amount. Under the amendment, holders of the "rolled up" portion of the DIP loan will receive new notes, while pre-bankruptcy senior lenders would be entitled to a pro rata share of 300 mln shares of new common stock in the reorganised company and the right to purchase additional shares of stock via a US$2.8 bln rights issue. In the amended reorganisation plan, LyondellBasell will consider the cash offer made by Reliance Industries last month to the tune of US$10-12 bln, adding if debtors choose to pursue a deal with Reliance, payment of any break-up fee to the rights offering sponsors will not be required. The fresh rescue plan provides for a cash infusion of $2.5 billion and the transfer of the company to the management and creditors. Under the rescue plan, the management will try to pay back $2-$4 billion loans that were taken after it went bankrupt. The plan will also try to address a section of old loans or those that were taken before LyondellBasell went bankrupt. Meanwhile, Reliance Industries, in its efforts to gain control over LyondellBasell, is looking to team up with the unsecured creditors and bond holders of the bankrupt Dutch petrochemicals giant. A bankruptcy court in New York will hear the updated rescue plan of the management tomorrow and take the views of creditors to LyondellBasell on the proposal. RIL is expected to wait for the result of tomorrow's hearing before floating a concrete proposal on formulating an alternative plan. The revival plan of the management, if implemented, may dilute the rights of the equity holders and transfer the company to the sponsors of the US$2.5 billion rights issue - former owner and Russian-born billionaire Len Blavatnik and two investors, and its secured creditors. According to legal experts, as there is no collateral offered to unsecured creditors for their loans, the equity offering to them would depend on the court's verdict. The US bankruptcy court will clear the revival plan of the LyondellBasell management if half of the debtors in each class accept the proposal. Also, the half should also have two-thirds of the claims in financial terms. After filing the revival proposal, the management said it might rework the plan if a class of claimants disapproved it.
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