The judge overseeing the bankruptcy of chemicals maker Lyondell Chemical Co approved a motion to appoint an examiner to review a portion of the company's reorganization.
The decision, announced on Monday, was in response to the request by Lyondell's official committee of unsecured creditors, who said the company had lost sight of its fiduciary responsibility to all of the company's creditors.
The judge, Robert Gerber of the U.S. bankruptcy court in Manhattan, limited the scope of the examiner's responsibilities to three areas, including the process the company used to consider a rights-offering sponsor.
In addition, the examiner would report on Lyondell's business judgment in deciding not to refinance a debtor-in-possession facility and on the process for including a litigation reserve in its plan for reorganization.
The company had asked that the examiner be limited to selection of a rights-offering sponsor.
We are pleased that the court will narrow the scope of the examiner's appointment to three distinct areas of inquiry, said Lyondell spokesman David Harpole. We fully expect that the examiner will confirm that the process we have followed throughout this case has been appropriate.
The name of an examiner would be submitted to the judge by Wednesday, with an option to extend to Friday.
Judge Gerber told a packed courtroom that all parties must work quickly to reach agreement. My job as a judge is to ensure that the patient doesn't die on operating tale while inter-creditor disputes continue, he said.
At the same hearing, Judge Gerber denied a Bank of New York Mellon motion asking that the judge order that Lyondell seek refinancing of its DIP financing.
Lyondell is part of the U.S. units of LyondellBasell, which filed for bankruptcy protection in January, unable to make its debt obligations after demand dropped for petrochemicals products during the global economic downturn.
LyondellBasell, the Luxembourg-based holding company, is owned by investor Len Blavatnik through New York-based Access Industries.
LyondellBasell had taken on billions of dollars of debt obligations when Access Industries led a 2007 buyout. The official committee of unsecured creditors has argued that the merger set the company up to fail.
The bankruptcy case is In re: Lyondell Chemical Co., U.S. Bankruptcy Court, Southern District of New York, No. 09-10023.
(Editing by Steve Orlofsky)