  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
Facts: Post-petition, Lyondell Chemical Co. ("Lyondell") and its affiliates (the "Debtors") filed an adversary proceeding seeking a preliminary injunction of two types: (1) enjoining creditors of the Debtors in this case from pursuing remedies against the Debtors' parent LyondellBasell Industries AF S.C.A. ("LBIAF") arising from certain guaranties of debt incurred by the Debtors; and (2) enjoining creditors of LBIAF from pursuing their remedies due to covenant and payment defaults on notes issued by LBIAF's predecessor in the principal amount of $615 million due in 2015 (the "2015 Notes"). Needless to say, the relationships between the Debtors, LBIAF, LBIAF's single subsidiary, Basell Funding S.a.r.l. ("Basell Funding"), which has many direct and indirect subsidiaries most of which are in Europe, and LBIAF's other subsidiaries, is very complex. Suffice it to say for purposes of this summary that LBIAF guaranteed certain commercial transactions that were entered into by certain of the Debtors. The guaranty claims amounted to between $131 and $200 million. Additionally, LBIAF's predecessor issued the 2015 Notes. Although LBIAF is now the principal obligor, the 2015 Notes are "guarantied by certain of LBIAF's subsidiaries..., including a number of the Debtors." The 2015 Notes are secured by a pledge of LBIAF's shares in Basell Funding. The Debtors bankruptcy triggered an event of default under the indenture of the 2015 Notes, although no action has been taken on this event of default. LBIAF's principal assets, for purposes of this hearing, are the following: "indirect equity interests in, and receivables from, European subsidiaries ..." Thus, the creditors with guaranty claims cannot recover until all of LBIAF's subsidiaries' creditors are satisfied. Additionally, under an intercreditor agreement, "the 2015 Noteholders are prohibited from taking action to enforce their rights against their collateral or the LBIAF subsidiary guaranties until after the senior secured debt has been fully discharged--or, more significantly as a practical matter, after the expiration of a 179-day standstill period."
Issues: Whether the Court should grant, under § 105(a) of the Bankruptcy Code, the Debtors' motions to enjoin its creditors and the creditors of its parent company from pursuing their remedies.
Rules: Section 105(a) of the Bankruptcy Code "provides that 'the court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.'" "[C]ourts have applied the 'traditional preliminary injunction standard as modified to fit the bankruptcy context.'" In analyzing the standard, courts use the following factors: "(1) whether there is a [reasonable] likelihood of successful reorganization; (2) whether there is an imminent irreparable harm to the estate in the absence of an injunction; (3) whether the balance of harms tips in favor of the moving party; and (4) whether the public interest weighs in favor of an injunction." (citations omitted)
Holding: The Debtors' requests are granted. An injunction is in place for a period of 60 days and with the following three prohibitions: "(a) the transfer or encumbrance by LBIAF of the Basell Funding stock; (b) the transfer, encumbrance, release, settlement, or compromise of LBIAF's receivables; and (c) payments outside of the ordinary course." Any statutes of limitation with regard to possible fraudulent transfer claims as to the Debtors or the non-debtor entities are tolled. The injunction does not prevent LBIAF from filing voluntary proceedings in any court, nor does it preclude LBIAF and its creditors from trying to come to a consensual workout or restructuring. (Additionally, Judge Gerber allowed one creditor - ConocoPhillips - to continue to take actions to perfect a security interest that may result from its attempted attachment of the Debtors assets (as would be permitted under § 546(b) of the Bankruptcy Code) so long as ConocoPhillips does not seek to enforce any lien or attachment.)
