Blavatnik fights back on Lyondell creditors claims

NEW YORK (Reuters) - Billionaire investor Len Blavatnik and his company Access Industries on Friday hit back at claims he knew the $12 billion 2007 leveraged buyout that created petrochemicals maker LyondellBasell would fail.

A trustee acting on behalf of Lyondell's creditors sued Blavatnik, Access and other executives and advisors, who put together the deal, claiming they set the company up to fail by leaving it with too much debt and unreasonably small capital.

On Friday, however, Blavatnik and Access said they had every reason to believe the merger between Basell and Lyondell would succeed.

"This lawsuit has been brought by the trustee using 20/20 hindsight," Blavatnik and Access said in a response filed on Friday in U.S. bankruptcy court in Manhattan.

"The unprecedented economic climate of 2008 was not foreseeable at the time of the merger."

Blavatnik had led the merger in 2007 to create the world's third largest petrochemicals maker, by crafting a leveraged buyout of Lyondell through Basell, which his company acquired in 2005.

By the time Lyondell filed for bankruptcy during a liquidity crisis in January 2009, Access and Blavatnik had about $5 billion to $7 billion of capital at risk in the company.

In the court papers, Blavatnik sided with the company's executives who have said the petrochemicals maker fell victim to a "perfect storm squared" when oil prices soared and the economy collapsed, hitting its revenues just as it was struggling with skyrocketing costs.

Access also claimed in the court papers the industrial holding company and its executives were explicitly exempted from liability in contracts it had with LyondellBasell.

LyondellBasell got approval to exit bankruptcy in April and Access retains a significant stake in the reorganized company.

The claims in the suit were also lodged during the bankruptcy against the banks, advisors and executives that helped put the 2007 merger together. The banks and the company settled those claims for $450 million as part of a deal to get the company out of bankruptcy.

Deutsche Bank Securities Inc, which acted as an advisor to Lyondell on the merger, also filed papers seeking dismissal of the claims.

The case is Edward S. Weisfelner, as litigation trustee of the LB Litigation Trust v. Leonard Blavatnik et al, U.S. Bankruptcy Court, Southern District of New York, No. 09-01375. The bankruptcy case is In re: Lyondell Chemical Co, U.S. Bankruptcy Court, Southern District of New York, No. 09-10023

(Reporting by Emily Chasan; Editing by Jonathon Burch)

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