NEW YORK - Bankrupt Lyondell Chemical Co has sued some of its bondholders to prevent them from trying to collect money when an agreement ends next month, arguing the consequences of letting them do so would be disastrous and threaten its European units.
Lyondell, part of the U.S. units of LyondellBasell Industries,warned in a suit filed Friday in federal bankruptcy court in Manhattan that if the court did not prevent those bondholders, it could trigger a default and force its European units, which were not part of a bankruptcy in January, into insolvency.
The standstill agreement that was reached in March expires on Sept. 18, at which date principal and interest will be due on the notes held by the bondholders.
Lyondell is seeking an injunction to prevent these bondholders from taking action until Jan. 31, giving the company time to confirm its reorganization plan.
The company expects to file a plan with the court on Sept. 15 and a spokesman said on Monday a plan had already been sent to major creditors for their review.
The company said in the suit that its European units cannot afford to make the payments, possibly prompting defaults that could lead bondholders to file involuntary bankruptcies against the affiliates.
The enormous loss of value that would occur if the European entities were liquidated would have a direct, immediate, and irreparable impact, on Lyondell's value, the Houston-based company said in its suit.
The suit was filed against Wilmington Trust Co, which is the trustee for bondholders holding two sets of notes expiring in Aug. 2015, one for $615 million and the other for 500 million euros ($716 million).
Lyondell filed for bankruptcy in January under the weight of its debt and falling demand for its products.
The case is In re: Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York. ($1=.6982 euro) (By Phil Wahba and Tom Hals; Editing by Tim Dobbyn)