Lyondell files amended plan to include lender settlement, $2.8 billion equity commitment

By Caroline Salls

Pittsburgh, Dec. 24 - Lyondell Chemical Co. has filed a second amended plan of reorganization and disclosure statement, entered into a plan support agreement with holders of a significant amount of its pre-bankruptcy secured debt and requested court approval of a settlement of various claims against its pre-bankruptcy secured senior and bridge lenders, according to a company news release.

The company also asked the court to approve an equity commitment agreement under which a group consisting of an affiliate of Apollo Management VII, LP, an affiliate of Access Industries and Ares Corporate Opportunities Fund III, LP has agreed to backstop the equity rights offering included in the amended plan by purchasing any shares of common stock not subscribed for by senior creditors.

The company said a total of $2.8 billion will be raised through the purchase of equity under the plan. Lyondell said the commitment agreement does not prohibit it from considering other bona fide equity purchase proposals.

Settlement terms

According to court documents, under the lender litigation settlement:

• A total of $300 million will be distributed in cash to unsecured creditors of Lyondell's obligor debtors, Millennium Specialty Chemicals, Inc. and Millennium Petrochemicals, Inc.;

• The financing party defendants will contribute their right to enforce all subordination and turnover provisions against the company's 2015 noteholders to its estate;

• An official committee of unsecured creditors lawsuit will survive, and the prosecution will be financed by Lyondell with up to $15 million of interest-free advances, which will be repaid out of proceeds or forgiven if no proceeds are recovered;

• The financing party defendants will release any claims to share in the $300 million payment and the net recoveries of the committee litigation against non-settling defendants;

• General unsecured creditors of obligor debtors and the Millennium entities will receive a certain cash recovery of $0.10 on the dollar under the settlement, plus the net recoveries of claims asserted against access group and director and officer defendants, which could result in recoveries exceeding $1 billion; and

• Bridge lenders, who are owed more than $8 billion on a secured basis, would receive equity and warrants valued at less than $0.10 on the dollar and zero cash.

Lyondell said approval of the lender litigation settlement will help pave the way for its emergence from Chapter 11 bankruptcy.

Plan changes

The plan and disclosure statement have been revised to implement the lender litigation settlement and the current state of agreement among various creditor constituents.

The company said these documents have been revised to reflect the agreement reached with substantial holders of the senior and bridge debt to convert roughly $18 billion of senior and bridge debt into common equity under the plan.

The lender litigation settlement and equity commitment agreement are subject to approval by the U.S. Bankruptcy Court for the Southern District of New York.

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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