With What RIL's Offering For Lyondell, Its A Pain For Len& Lenders

Len Blavatnik led LyondellBasell is bunking RIL’s $12Bn valuation as too low. Len bought Basell Polyolefins from Royal Dutch Shell and BASF for $5.7 Bn in August 2005. Then in 2007, It bought Lyondell Chemical Company for $12.7 Bn, so lets say he’s already sunk close to $19Bn in this.

Lyondell’s buyout was majorly funded by debt from a consortium of lenders which included Merrill Lynch, Goldman Sachs, Citigroup, ABN Amro and UBS among others.

The LBO turned soar for Len when the demand for products suddenly collapsed in the second half of 2008 and the company was unable to pay fees and interest totalling $281 Mn on a bridge loan due on 19th Dec’08. As a result of which, The US unit of LyondellBasell filed for Chapter 11 bankruptcy protection in Jan'09 to facilitate a restructuring of its $26 Bn debt.

During bankruptcy, LyondellBasell added further burden to its existing debt by obtaining $8 Bn in debtor-in-possession (DIP) financing to fund continuing operations. The DIP financing included two credit agreements: a $6.5 Bn term loan (comprising $3.25 Bn in new loans and a $3.25 Bn roll-up of existing loans) and a $1.62 Bn asset-based lending facility.

Lyondell has submitted a restructuring plan which involved LBI repaying its $8 Bn bankruptcy loan in full and giving an equity stake in the new firm to lenders, including sponsors of the $2.8 Bn rights offering.

Law firm Milbank Tweed Hadley & McCloy is representing the lenders group.

What is Reliance offering?

RIL is offering about $12 Bn for LyondellBasell which posted $50.7 Bn in sales last year, valuing Lyondell 1/4th of sales. The petrochemical company has $27.1 Bn of assets and $19.3 Bn of debt, according to its bankruptcy filing.

RIL also made a statement recently that it will not buy Lyondell’s debt. According to Macquarie Research, RIL has enough resources to buy Lyondell. It has $4 Bn of cash, $8 Bn of treasury stock.

Will the transaction go through if the debt is left out?

Whether the asset will sell or not is tied up to what debtors get out of it.

Earlier in 2008, Citigroup sold $1.9 Bn of its Lyondell loan to Apollo Management at about 85 cents to a dollar, the prices of which tumbled to 44 cents to a dollar just after the crash.(And Leon took a lot of ridicule for catching that falling knife)

If we consider a pricing of 75 cents to dollar for the Lyondell debt which currently stands at $26 Bn, the cost of debt alone would be about $19 Bn, i.e. if the debtors agree for a haircut.

I wonder if RIL were to go for a $10 Bn loan - which Wallstreet will syndicate - how would they like to syndicate a loan that pays them back their bad debt with haircuts...

I really think this one deal is not possible with so many debtors holding high priced bag..

LyondellBasell which employs more than 17000 people generates about 34% of its revenue from fuels, 30% from chemicals and 35% from plastics.

Previous Article

IndiaBulls Fin- Sogecap JV Ends

Next Article

Batelco To Sell STel Stake To Indian Partner

All Comments

Readers' Recommendations

1

October 26, 2010 07:26 AM

He has a much different role now as hermes handbags. Jimmy Choo handbags, promoted to GM when Tom Heckert left for Cleveland Juicy Couture handbags, is preparing to preside over his first draft in his new Kooba handbags. It's a crucial one for the Eagles, who have 11 picks Lancel handbags, including seven in the first four rounds.The 34-year-old Loewe handbags in 2000 as a salary cap adviser. He dutifully observed the decision makers in the draft room during his early years with the Louis Vuitton handbags, and patiently waited for an opportunity to be the man."A lot of listening in those early years Luella handbags, listening to the discussions, listening to the thought process Marc Jacobos handbags, taking Marni handbags," Roseman said. "I'm sitting there with my computer and a pad. I thought Miumiu handbags was invaluable. It was a great experience for me to see the thought process Mulberry handbags went into it. It was a great experience to be in Prada handbags position in those early years. They had a lot of trust in me."While coach Andy Reid has final say Thomaswylde handbags, Roseman will be right there with Valentino handbags next week. He manages the college and pro scouting staffs, organizes draft meetings and the draft board and scouts the top collegiate players.It's the culmination of Versace handbags."I was lucky in Yves Saint Laurent handbags when I was little I knew what I wanted to do replica Anya Hindmarch replica handbags," Roseman said. "When I was seven or eight, I would sit in front of the Armani replica handbags on draft weekend and have my notebooks and do it. This was a direction I always wanted to go into."When Roseman sat in on the 2001 draft Balenciaga replica handbags, wide receiver Freddie Mitchell was selected 25th overall. Mitchell wound up a bust, out of the NFL four years later.Roseman can't afford to make a similar mistake Bally replica handbags year. The Eagles have the 24th pick and own two picks in the second round Bottega Veneta replica handbags, Nos. 37 and 55. They got the 37th pick in the trade Burberry replica handbags sent six-time Pro Bowl quarterback Donovan McNabb to Washington.Afte r going 11-5 and losing to Dallas in a wild-card playoff, the Eagles overhauled their roster. They parted with several big-name veterans and shed quite a bit of salary.Gone are McNabb Cartier replica handbags, former All-Pros Brian Westbrook and Shawn Andrews, Sheldon Brown Celine replica handbags, Chanel replica handbags, Will Witherspoon Chloe replica handbags, Darren Howard and Chris Gocong.Kevin Kolb steps in for McNabb and he's surrounded by a talented group of skill players, including wide receivers DeSean Jackson and Christian Dior replica handbags, running back LeSean McCoy, fullback Leonard Weaver and Coach replica handbags. Offense shouldn't be a problem. But the Eagles need plenty of help on defense.Philade lphia's first pick could be a safety - Posted by bags Recommended by 0 Readers