NY court refuses Lyondellbasell creditors' motion to file new rescue plan with RIL

A US bankruptcy judge on Tuesday gave bankrupt chemicals company Lyondell Chemical Co more time to exclusively file a plan of reorganisation, and denied a creditors' motion to expand a probe into some of the company's restructuring methods.

The judge also denied a motion to stop so-called adequate protection payments of about $40 million per month to first-lien lenders, saying that doing so would cause the company to default on its bankruptcy financing agreement.

"I'm not in a position to risk the consequences that might flow from that except in a situation of the most dire need," said US bankruptcy judge Robert Gerber at a hearing in Manhattan.

Lyondell will have until April 15 to plan its reorganisation without competing plans from other parties.

"... With so much going on, I'm not of a mind to open up exclusivity to anybody other than the debtors," Gerber said, referring to the complexity and antagonistic nature of the case. Unsecured creditors had requested permission from the Court to work with strategic investors such as Reliance Industries (RIL) to come up with their own plan, claiming that the company management may not be dealing equitably with bids from third parties such as RIL.

He also denied motion by the official committee of unsecured creditors to expand the duties of a court-appointed examiner  to ensure that the petrochemicals manufacturer is fairly evaluating proposals from potential suitors such as India's Reliance Industries Ltd.

"It is inappropriate for me to look to an examiner to do my job," Gerber said at the hearing held at the US bankruptcy Court for the Southern District of New York.

"While I may growl and grimace with the (number) of those issues, I will do my job."

The judge said that the duty of the examiner, Georgia State University law professor Jack F Williams, had ended after he filed a report with his findings on the company's debtor-in-possession financing arrangements, among other questions. The creditors wanted the court to give wider powers to the examiner so that he could monitor whether Lyondell management was taking third-party approaches, such as that from RIL, seriously. "The examiner's report gave me no cause for concern as to debtor conduct or especially matters that the examiner was asked to investigate," Gerber said.

The company said it was "pleased" with the court's decisions. On the examiner decision, spokesman David Harpole said via email that "the examiner previously concluded that we have acted fairly and in accordance with our fiduciary duties and this was again affirmed in court today."

Judge Gerber denied the motion to discontinue adequate protection payments to first-lien lenders. The official committee of unsecured creditors had argued that the enterprise value of the company was lower than previously estimated and the lenders were under secured.

Adequate protection agreements are struck to assure parties with an interest in a bankrupt company's property that the value of their holdings will not be diminished during the bankruptcy proceedings.

So far, the lenders have received about $440 million in post-petition interest payments through September, according to court documents. "The debtors should not be required to throw cash down the drain because of a premature, now wholly outdated and overly optimistic assessment of enterprise value that was presented to the court," attorneys for the official committee of unsecured creditors said in a court document.

Duff & Phelps had estimated that the company has an enterprise value of $19 billion. The company has stated that its value is about $14.5 billion.

"I have probable cause to believe it's likely, if not certain, that the Duff valuation was too high, and probably way too high," said Judge Gerber. "It is at least arguable that better valuations prepared now ... would find that senior secured lenders were under secured."

Still, he said, ordering the payments stopped would cause massive disruption and he denied the motion.

"The court's decision not to intervene in the adequate protection issue was actually favorable to us because other options could create issues for our DIP financing that we are committed to avoiding," said Lyondell's Harpole.

Lyondell is a US unit of Luxembourg-based holding company LyondellBasell, which filed for bankruptcy protection last January after being unable to meet its debt obligations.

LyondellBasell, is owned by investor Len Blavatnik through New York-based Access Industries.

Lyondell took on billions of dollars of debt when Access Industries led a 2007 buyout of the petrochemicals company.

Reliance has sweetened an offer to buy a controlling stake in LyondellBasell Industries that values the company at $13.5 billion, a source familiar with the situation told Reuters on January 8.

The case is In re: Lyondell Chemical Co, U.S. Bankruptcy Court, Southern District of New York, No. 09-10023.