Lyondell Seeks Court Permission to Boost Debt (Update1)

March 18 (Bloomberg) -- Lyondell Chemical Co. sought court permission to take on up to $5.25 billion in debt to fund its exit from bankruptcy, giving it up to $8.05 billion in financing including money raised from equity.

Lyondell said in court documents filed in Manhattan today that it plans to fund an exit from Chapter 11 with three types of loans: a $1.75 billion credit facility, which can be increased to $2 billion, a $2.25 billion notes offering, and a $1 billion term loan.

The chemical maker already has commitments to backstop a $2.8 billion equity rights offering.

“Approval of this motion will assure the debtors of the availability of exit financing on favorable terms,” lawyers for the company wrote, noting that it’s in the best interest of the company to lock in the terms of the loans now, as the market for high yield debt is “extremely favorable.”

The loans will cost around $80 million to the company, and it will owe a $160 million fee if its bankruptcy plan isn’t confirmed.

Lyondell said its notes and term loans would be raised after the company is reorganized, and will be taken on through a new entity, LBI NV, which is owned by its non-bankrupt parent, LyondellBasell Industries N.V.

The chemical maker, based in Houston, said March 8 that its plan to reorganize by repaying its $8 billion bankruptcy loan and giving an equity stake in the new company to lenders is a better deal for creditors than a $14.5 billion purchase offer by India-based Reliance Industries Ltd.

U.S. Bankruptcy Court Judge Robert Gerber in Manhattan has already approved an outline of the terms for its reorganization, which value the company at $15.2 billion.

The case is In re Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.