Bond terms barred Lyondell-Basell merge, suit says
NEW YORK - The 2007 leveraged buyout of Lyondell Chemical Co by Basell should not have taken place because it was prohibited under Basell's bondholder agreements, the indentured trustee for Basell's senior bondholders has claimed in a new lawsuit.
Wilmington Trust, which serves as the indenture trustee on LyondellBasell senior notes, filed the suit in a New York bankruptcy court on Thursday, claiming the banks and advisers who put together the $12.7 billion merger violated agreements about how the company was to take on new debt.
The suit claims that under Lyondell's senior notes indenture and a 2005 intercreditor agreement, the leveraged buyout should and could not have been consummated because the agreements strictly limited how the company could take on new debt and had express terms for how debt could be refinanced that were not followed.
LyondellBasell took on billions of dollars of debt obligations when billionaire investor Len Blavatnik and his New York-based company Access Industries led the 2007 buyout. But Lyondell was forced to file for bankruptcy just 13 months later in January 2009, when it suddenly ran out of cash and found it couldn't handle its heavy debt load amid a drop in demand for its products.
The indentured trustee's suit echoed complaints from Lyondell's official committee of unsecured creditors that the merger had set the company up to fail.
The LBO debt, which was over $20 billion and increased the aggregate debt of Basell by over $18 billion ... provided no real benefit to either the purchasing or 'bought out' company, the Wilmington Trust suit alleges.
Lyondell's creditor committee filed a $22 billion suit in July against the banks, advisers and executives who arranged the deal, and a trial on those allegations is set to begin in December in U.S. bankruptcy court in Manhattan.
A Lyondell bankruptcy attorney was not immediately available to comment.
The bankruptcy case is In re: Lyondell Chemical Co., U.S. Bankruptcy Court, Southern District of New York, No. 09-10023. (Reporting by Emily Chasan, editing by Gerald E. McCormick)
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