Court approves Lyondell Chemical's contested DIP loan

By Rebecca Melvin

New York, Feb. 27 - Lyondell Chemical Co.'s $8 billion debtor-in-possession credit agreement - the largest in history - was granted final approval by the U.S. Bankruptcy Court for the Southern District of New York Friday.

Subject to a few minor changes in dates and provisions, the agreement was approved virtually unchanged, and objections against the agreement were overruled.

Judge Robert Gerber said he based his decision on standards set in a ruling in 2003 associated with the bankruptcy of Farmland Industries Inc., a Kansas City, Mo., farm-owned cooperative.

The Lyondell agreement is a matter of necessity and appropriate business judgment, and is reasonable given the debtors-borrower and lenders.

Gerber didn't demand changes in the agreement's one-year maturity date or pricing, which were disputed by objectors, including the official committee of unsecured creditors.

Gerber ruled that neither the Dec. 15, 2009 maturity, nor the milestones leading up to that date, were imposed with an intent to foist the borrower in default, as objectors argued, but rather arose due to current credit market environment and due to the fact that Lyondell wasn't able to provide lenders with adequate long-term visibility into the company's business.

Gerber said he wasn't ruling that one-year facilities are now the norm, but instead that they are not now atypical given current credit market environment.

He insisted on a couple of changes in milestones in the final order, including that the Oct. 15 deadline for obtaining approval from the bankruptcy court be changed to Oct. 23, extendable to Oct. 30 if necessary.

Lyondell is a U.S. subsidiary of LyondellBasell, a Netherlands-based polymer, petrochemicals and fuels company. LyondellBasell's U.S. operations and one of its European holding companies filed for bankruptcy on Jan. 6. The Chapter 11 case number is 09-10023.

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