Mukesh Ambani-controlled Reliance Industries (RIL) is expected to buy out a fifth of LyondellBasell’s $27 billion gross debt and seek a rollover of the balance after acquisition, as a step towards gaining the confidence of creditors in its plans to acquire the world’s third largest petrochemical company, sources familiar with the developments said.
Luxembourg-based LB, now in bankruptcy proceedings, has $7.06 billion in bonds and loans due to mature next year and a further $20 billion debt due through 2027.
An RIL team, headed by Mukesh Ambani’s confidant, Manoj Modi, is in the US negotiating with the LB management as well as with the secured and unsecured creditors to file a restructuring plan. The company is expected to buy out about $5-6 billion debt of LB, said two banking sources. The RIL team has been assigned to frame a binding proposal for the acquisition that includes initial payment to LB’s secured and unsecured creditors.
RIL’s chief financial officer Alok Agarwal, executive director Ravi Mohan and Kamal P Nanavathy, president, crackers and polymers, are in the special team designated for the LB acquisition. Most of them are now in the US to spearhead the negotiations, said an RIL executive on condition of anonymity.
“RIL would be ready to make a $5-6 billion payment towards the liabilites to the creditors for gaining their support,” said an executive with a global bank. However, the decision on payments to owners of LB will be taken only after analysing the financials of the petrochemical giant, he added. An RIL spokesperson declined to comment on the development. The company owes $2.8 billion to unsecured creditors. Citigroup, Merrill Lynch, Goldman Sachs, UBS and ABN Amro are among the secured creditors of the company. Apollo is one of the biggest of Lyondell’s debtors, with a $2 billion loan.
Another RIL executive said initial talks with the management would be completed before the New York bankruptcy court’s hearing on December 14. “A detailed restructuring plan will be submitted later, based on the financials of LB. If the court-appointed management agrees to the plan, it will be forwarded to the bankruptcy court,” he said on condition of anonymity. RIL has also assigned a team of legal experts for attending bankruptcy court proceedings from next week. “We have to be clear on the legal complications involved in the deal,” said the executive.
LB is under Chapter 11 reorganization that would require positive approval from all lenders, in the pecking order of secured to unsecured. Any disapproval if they deem the terms to be unfair could add to delays, adding to the complexity of the transaction. Similar delays happened in the case of Sterlite’s Asarco bid.