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Volume 87 Issue 51 | p. 9 | News of The Week
Issue Date: December 21, 2009

Reorganization Complications

Bankruptcy: LyondellBasell and Tronox work with creditors while possible buyers look on
Department: Business
Keywords: Bankruptcy, reorganization, Chapter 11, titanium dioxide
Huntsman hopes to buy Tronox assets, including this TiO2 plant in the Netherlands.
Credit: Tronox
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Huntsman hopes to buy Tronox assets, including this TiO2 plant in the Netherlands.
Credit: Tronox

The reorganization plans of LyondellBasell Industries and Tronox, both in bankruptcy court, are moving forward even as outside firms look to cash in on their troubles.

In January, petrochemical maker Lyondell filed for bankruptcy protection in the face of crushing debt of approximately $26 billion. In November, Lyondell received a preliminary cash offer from India’s Reliance Industries to take a controlling interest in the firm after it emerges from bankruptcy (C&EN, Nov. 30, page 10).

Despite the outside offer, Lyondell is proceeding with its own reorganization. A plan filed on Dec. 11 outlines a streamlined corporate structure and a stock-rights offering that would raise $2.8 billion in new capital. The funds would be used to operate the company after bankruptcy and to pay down debt. The filing also provided details on how money would be distributed to various classes of creditors.

Lyondell spokesman David Harpole says the key next steps are to have the reorganization plan confirmed by the bankruptcy court in February, after which it would be presented to creditors for voting. Before that happens, the court will address a proposed settlement with the unsecured creditors that sued the banks and advisory firms involved in Lyondell Chemical’s 2007 buyout of Basell.

Harpole won’t comment on a possible binding offer from Reliance, which could emerge at any time. But he does say Lyondell has a hearing scheduled for January to extend to Sept. 6 the company’s exclusive right to present reorganization plans to the bankruptcy court, thus keeping control over possible outside offers.

Meanwhile, titanium dioxide maker Tronox is being hassled by bidder Huntsman Corp. for postponing an asset auction that was supposed to occur on Dec. 8. In August, Huntsman agreed to purchase most of Tronox’ production assets for $415 million, provided a higher bidder doesn’t emerge at the auction.

But Huntsman complained in a bankruptcy court filing that “at a Dec. 3, 2009, status conference, the debtors, without any notice to Huntsman, adjourned the auction and sale hearing to Dec. 21 and 22, 2009, respectively, and indicated that they may not hold an auction at all.”

In a statement, Tronox says that it plans to proceed with the Dec. 21 auction but that it is also working on a reorganization plan with its unsecured creditors and the U.S. attorney. The plan would include debt financing and an equity commitment of $105 million for environmental remediation trusts and a litigation trust. Environmental liabilities dating from Tronox’ 2006 spin-off from Kerr-McGee were a major reason for the bankruptcy filing.

Huntsman’s offer for some of Tronox’ assets would not cover a significant portion of the claims of the unsecured creditors, says Gregg Goodnight of the Pearland, Texas-based consulting firm Chem­Analysis. “Unsecured creditors can try to block whatever plan is proposed in bankruptcy court. They will fight the plan if they don’t think they will get their claims settled at a high enough percentage.”

 
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