MANHATTAN (CN) – Fourteen noteholders say The Bank of New York Mellon owes them nearly $1 billion for allowing Basell, a Luxembourg-based plastics company, to buy Texas-based Lyondell Chemical for $20 billion in a leveraged buyout, “all of which it borrowed from a group of banks.” Suing BNY Mellon as indenture trustee for the notes, the plaintiff investment funds say, “The LBO increased Basell’s senior debt more than tenfold, rendered it unable to make good on the notes, and in fact led to the bankruptcy of Lyondell a mere 13 months later.”
The fiasco propelled both Lyondell and several Basell affiliates into bankruptcy, leaving the plaintiffs with a “very small percentage” of the $1 billion owed to them, according to the complaint in New York County Court.
“The plaintiffs own approximately $500 million and ¬ 388 million face amount of the 2015 notes and have been paid only a fraction of what they are owed,” the complaint states. “Plaintiffs sue to recover massive damages caused them by defendant The Bank of New York Mellon (‘BNY’) in its capacity as Indenture Trustee for the Notes.”
The plaintiffs are Arrowgrass Master Fund Ltd., Arrowgrass Distressed Opportunities Fund Limited, Caspian Capital Partners LP, Caspian Select Credit Master Fund Ltd., Columbus Hill Overseas Ltd., Columbus Hill Partners Ltd., CQS Directional Opportunities Master Fund Limited, CVI GVF (Lux) Master Sarl, Fortelus Special Situations Master Fund Ltd., Investcorp Interlachen Multi-Strategy Master Fund Limited, Kassahun Kebede, Kivu Investment Fund Limited, Mariner LDC, and Panton Master Fund LP.
“Had BNY on behalf of the 2015 Noteholders exercised its rights and remedies with respect to the LBO, it could not and would not have been consummated, or would have been consummated on terms ensuring full payment of principal and interest to the 2015 Noteholders,” according to the complaint.
The complaint continues: The LBO violated the Indenture. Instead of asserting these defaults and taking other actions to protect the Noteholders’ interests, BNY, inexplicably, signed an intercreditor agreement that enabled the LBO to go forward, and that purported to subordinate the 2015 Notes to the massive debt generated by the LBO (the ‘LBO Debt’). BNY signed that agreement prejudicing the 2015 Noteholders without so much as notifying them, let alone seeking their consent (as was expressly required under the 2015 Notes Indenture). BNY failed to take other actions required by the Indenture, including obtaining a required solvency opinion in connection with the LBO and obtaining required officer’s certificates and opinions of counsel.
“BNY’s actions and omissions violated the Indenture, other applicable agreements and its legal obligations. BNY’s conduct fell far short of the standard of care required of it and routinely exercised by indenture trustees (and by BNY itself with respect to far less important matters under the Indenture). As Indenture Trustee, BNY should have been protecting the Noteholders’ interests, instead of harming them as it did.” (Emphasis and parentheses in complaint.)
Basell has been renamed LyondellBasell Industries (LBI).
Less than 4 months after Lyondell and the Basell affiliates filed for Chapter 11 bankruptcy in the United States, “LBI also filed for bankruptcy,” according to the complaint.
“In the bankruptcy, a plan of reorganization was confirmed under which the plaintiffs will recover only a very small percentage of the approximately $1 billion owed to them. BNY’s actions and omissions directly caused the hundreds of millions of dollars in losses that plaintiffs now seek to recover from it.”
The noteholders allege breach of contract, breach of fiduciary duty and negligence. They are represented by Marc E. Kasowitz with Kasowitz, Benson, Torres & Friedman.