By Pat Holohan
Leonard Blavatnik finished his stint on the witness stand this afternoon, defending his company’s entry into the deal that created LyondellBasell in 2007.
Litigation trustee Ed Weisfelner of Brown Rudnick and his team conducted more than three hours of cross-examination of the billionaire investor today, asking mostly procedural questions to establish the history of the acquisition. Blavatnik spent about half an hour under redirect from his own lawyers at Quinn Emanuel, arguing that he and his fellow defendants were not guilty of breach of fiduciary duty, equitable subordination or any of the other charges the trustee has alleged.
The 2007 deal was financed entirely with $22 billion in funded debt, a burden that the company was unable to bear, the litigation trustee has argued. The defendants have argued that the merger was sound, but fell victim to the recession of 2008, an unforeseeable event for which the directors and officers should not be blamed.
Basell sought a merger with Lyondell to “create an incredible synergy and compensate for shortcomings,” as Lyondell had a strong North American presence and Basell is primarily a European company, Blavatnik said today.
When Lyondell exited bankruptcy back in 2009, its $1.1 billion in unsecured claims holders recovered an estimated 17 cents on the dollar. But Lyondell’s official committee of unsecured creditors (UCC), which fought the plan in bankruptcy, has continued the battle well after exit. Weisfelner served as counsel to the UCC during the bankruptcy case, has since served as litigation trustee to pursue claims on behalf of creditors. The parties gathered this week before Judge Martin Glenn of the US Bankruptcy Court for the Southern District of New York for a hearing that could go into November.
The trustee’s team has argued several times over the course of the trial that, although the company failed to meet its 2007 EBITDA forecasts, it “refreshed” projections that maintained or adjusted up the projected EBITDA for 2009-11.
But Blavatnik said today that the recession was still not yet in sight at time, and while the projections were off, they were not “significantly off.” He pointed out that the acquisition was not made for “quarter-by-quarter, immediate results,” and that he was not worried about short-term fluctuations. But less than a year later, the company filed for Chapter 11 protection.
“[E]ven after the bankruptcy filing I continued to believe that Basell’s acquisition of Lyondell in 2007 was sound and that, once the economy stabilized following the unprecedented dislocation of global markets, the combined company would be very strong and profitable,” Blavatnik said in a September declaration.
Judge Glenn has scheduled the trial to run for another 10 days after today’s session, the fifth day in the hearing so far.
Patrick Holohan is a bankruptcy reporter at Debtwire North America. Patrick has been covering in-court restructurings since 2011. He can be reached at Patrick.Holohan@debtwire.com.
