With all the talk of scrambling banks, out-of-luck debtors and barren credit markets, one would think that a company securing even $100 million in debtor-in-possession financing should consider itself lucky. And yet for Lyondell Chemical Co., that $100 million was just icing on the cake.
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Sure, the U.S. unit of LyondellBasell Industries AF filed for Chapter
11 on Tuesday and now faces the tough task of reorganizing in a perilous
environment. But Lyondell pulled off something not seen in several
months. First, it was able to arrange the most substantial
debtor-in-possession loan given out since Jan. 26, 2007 -- a DIP of up to
$8.5 billion, second only to the $10 billion one Calpine Corp. got
almost two years ago -- and one that includes more than $3 billion in new
money. And, on top of that, the company was also able to notch an
emergency, two-day, $100 million DIP.
So what happened to the credit crunch we keep hearing about?
We certainly saw it during 2008, when bankrupt companies decided to
liquidate because of the dearth of DIP and exit money. South Carolina
amusement park operator HRP Myrtle Beach Holdings LLC, for example, is
now liquidating after it couldn't get enough financing to recapitalize
and couldn't find a buyer. Mattress Discounters Corp. is trying to
dismiss its Chapter 11 case after having already abandoned its efforts
to reorganize when it couldn't get enough exit financing to confirm a
plan. Even plastics company Wellman Inc., which is reorganizing, had to
completely rework its plan because it couldn't secure an exit loan.
That's without even mentioning Delphi Corp.'s widely publicized exit
financing search.
Then there's Lyondell. Has the tide turned? Maybe, one bankruptcy attorney told us.
"The traditional DIP market has been very difficult, but there are some
signs of life to it," the attorney said, noting the large amount of new
money in the Lyondell DIP. "[That's] a lot of money by today
standards ... [and it] may be a sign that DIP financing is coming back."
Or simply that Lyondell has been deemed fit enough to survive. -
Ben Fidler
