Lyondell examiner finds 'nothing unusual' in plan sponsor selection process, DIP financing issues

By Caroline Salls

Pittsburgh, Dec. 22 - Lyondell Chemical Co.'s Chapter 11 examiner, Jack F. Williams, said he "did not find anything unusual" about the company's plan sponsor bidding process and debtor-in-possession financing issues, according to an examiner's report filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the examiner was charged with determining whether the case debtors have "done anything out of the ordinary in connection with their decisions" regarding the selection of a sponsor for the equity rights offering that is part of the planned exit financing, whether or not to get new debtor-in-possession facility financing; and proposing a litigation reserve in the plan of reorganization.

In this case, the court said "out of the ordinary" would mean "solely by reason of a conflict of interest or other breach of fiduciary duty or by acting in bad faith."

According to the motion for appointment of an examiner, the company's official committee of unsecured creditors said "the debtors' prepetition secured lenders, in concert with Leonard Blavatnik and entities controlled by him, orchestrated the busted leverage buyout that culminated in these bankruptcy proceedings."

In his report, Williams said he has "recovered nothing unusual about the process by which a bidder has been tentatively selected to serve as sponsor and backstop for the equity rights offering."

"The solicitation and bid process employed, including follow-up, is reasonable and appears designed to increase participation by significant bidders," Williams reported.

In addition, the examiner said he did not uncover anything unusual about the process by which the company has considered DIP financing-related issues, including the possibilities of any replacements or extensions.

The examiner did question the fact that one director has sole authority over key issues in Lyondell's case, although he said he found no evidence that that director, Stephen F. Cooper, has breached any duties or acted in bad faith in his role.

Lyondell is a U.S. subsidiary of LyondellBasell Industries AF SCA, a Netherlands-based polymer, petrochemicals and fuels company. LyondellBasell's U.S. operations and one of its European holding companies filed for bankruptcy on Jan. 6, 2009. The Chapter 11 case number is 09-10023.

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