Reliance lost Lyondell by just $700 m

The US bankruptcy court has approved LyondellBasell Industries’ reorganisation plan that involves repaying the company’s $8 billion bankruptcy loan, extinguishing all existing shares and giving equity stake in the new company to lenders.

Reliance Industries lost out by a razor-thin margin of $700 million as it reportedly offered $14.5 billion for Lyondell, refusing to match the company’s own valuation of $15.2 billion.

In a media statement, Lyondell said its plan has the support of all the major classes of creditors and it will soon emerge out of bankruptcy. The plan will now be put to vote before the creditors and is expected to be approved.

“With the approval of the disclosure statement, Lyondell can commence solicitation of acceptances of the plan. It also can now commence the rights offering to holders of its senior secured debt,” the company said, adding that the majority of holders of secured debt, unsecured debt and bonds have agreed to support the company’s plan.

Some secured creditors objected to the $15.2 billion valuation ascribed to the company, saying it was too low. The objections were, however, dismissed by Judge Robert Gerber.

Lyondell’s credit is being publicly traded and Judge Gerber urged the objecting parties to disclose if they had any equity, debt or short positions in the company. “I am not going to use disclosure statement as a means for you to continue to trade in the debt of this debtor or seek any of your other private agendas,” he said, approving the new valuation, nearly $4 billion lower than the initial estimate.

RIL had been given many chances by Lyondell creditors to increase its bid beyond $14.5 billion, according to New York-based media reports, but the Indian company did not. RIL had, it is believed, started out with a bid in the range of $12 billion, before increasing it twice after negotiations.

Most of the shares in the post-bankruptcy company will be owned by the banks and other institutions that had advanced around $18 billion of secured debt to the company in two stages over the last three years.

To meet immediate operational needs, Lyondell will raise debt of $3.25 billion, issue stock rights of $2.8 billion and take term loans of unspecified amounts, the company said.

 (With Bloomberg inputs)