Thursday, February 26, 2009

Lyondell Staring At The Abyss, Creditors Staring Back

The acrimony over the world's largest DIP is reaching fever pitch. For a second day in a row, Judge Gerber said he will listen to yet another round of arguments tomorrow before deciding whether to approve the Debtor in Possession loan. As we wrote previously, the fate of the company (at least over the next 6 months) hangs in the approval of the DIP, as without it Lyondell will proceed straight to liquidation. "I want to make sure I have my arms around this," said Gerber to DIP committee (ex ABN Amro) attorney Marshall Huebner of David Polk. The issue that non-DIP lenders have with the loan, is that, they allege, it gives the DIP lenders more protections than other pre-bankruptcy lenders. Huebner does not lack a sense of humor, and in his closing arguments said "creditors should be giving us a fruit basket" for agreeing to a DIP.

As we presumed earlier, Ed Weisfelner of Brown Rudnick, lawyer for the unsecured creditors, told Gerber there was no way the Company would be able to emerge by the loan's proposed December 15th date pointing out the $24 billion in total liabilities and 20,000 employees. Weisfelner is apparently also good in the repartee department, stating "We're here playing a fairly huge game of chicken. Your Honor has the choice of protecting general unsecured creditors, or lenders who have been fighting to fund the loan, which has been trending at or above par in the marketplace." Ah, ye old market test argument... never works in court but go for it. While we are against usurious loans, we don't see how the DIP committee doesn't fall apart if the Judge votes against the DIP, thereby dooming creditors to even lower returns. Sphere: Related Content
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