Richard I. Werder, Jr. Susheel Kirpalani Andrew J.

Rossman Peter Martino QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 (212) 849-7000 Counsel for Access Industries, Inc., Access Industries Holdings LLC, AI International, S.à.r.l., Nell Limited, Len Blavatnik, Lincoln Benet, and Philip Kassin UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x : In re: LYONDELL CHEMICAL : COMPANY, et al., : : : Debtors. : : : ---------------------------------------------------------------x

Case No. 09-100023 (REG) Chapter 11 (Jointly Administered)



Access Industries, Inc., Access Industries Holdings LLC ("Access"), AI International, S.à.r.l., Nell Limited, Len Blavatnik, Lincoln Benet, and Philip Kassin (collectively, the "Access Respondents"), parties in interest in these cases, hereby respond to the motion of the Official Committee of Unsecured Creditors (the "Committee") seeking standing to pursue claims on behalf of the Debtors' estates. PRELIMINARY STATEMENT 1. While the Access Respondents believe that the Proposed Complaint is meritless

for a host of reasons and that the Committee should not be given standing to pursue it, given the relatively low hurdle applied to standing motions, this limited objection seeks more modest relief. What the Access Respondents propose here is a way for the Court to sensibly structure proceedings on the Proposed Complaint in order to quickly and efficiently determine whether further proceedings are warranted on the Committee's most substantial and far-reaching claims. As a condition to conferring standing, the Committee should be put to its proof, and quickly, on a threshold issue that undergirds the Proposed Complaint, the resolution of which could save the Debtors' estates millions of dollars of professional fees if the Committee is wrong. 2. The Proposed Complaint hinges on one overarching issue: whether the combined

businesses of Basell AF S.C.A. ("Basell") and Lyondell Chemical Company ("Lyondell") were insolvent or left with unreasonably small capital at the time of the December 20, 2007 merger of Basell and Lyondell (the "Merger"). The Committee wrongly contends that the combined company was then insolvent or undercapitalized, a contention that was contradicted by every Rule 2004 deposition they took, the results of which were omitted for the obvious reason that they were inconsistent with the Committee's thesis. The Access Respondents genuinely believed at the time of the Merger that the merged company was both solvent and adequately capitalized,


otherwise they certainly would not have parted with billions of dollars of value in the equity of Basell to facilitate the transaction. So did the financial advisors who analyzed the Merger and the banks who financed it. And with good reason. The merged entity had billions of dollars in equity value upon closing and more than enough access to liquidity to pay its debts for over a year until the unforeseeable twin calamities of an historic economic crisis and an unprecedented commodities price volatility brought the company down. Because the Committee takes a

different view of history with the benefit of 20/20 hindsight, the Court should promptly tee up this single critical issue as a threshold matter for determination – before years of protracted litigation and tens of millions of dollars are wasted, further hindering the restructuring process for the Debtors. 3. The Debtors' estates (which have been funding all professional fees and expenses

except those of Access) should not become a feeding trough for lawyers, forensic financial advisors, and other retained consultants who want to litigate in kitchen-sink style simply because this is a "big chapter 11 case." With each passing month at the current burn rate, the prospects for a successful reorganization for the benefit of the hard-working employees and other stakeholders are pushed farther from sight, and the Court should impose some rationality on the process.1 4. Specifically, as a condition to the conferral of standing to an entity that represents

only one constituency (in contrast to a debtor in possession), the Committee should be required to satisfy the threshold issue that is a prerequisite to any of their challenges to the Merger first,

Unlike many cases where litigation of this sort is commenced (e.g., Adelphia), this is not a liquidating case where litigants can "have at it" and fight for years over a finite knowable pool of assets. The Debtors, over which several of the Access Respondents serve as board members, have a viable business that has the ability to rehabilitate in this changing economic environment for the benefit of their thousands of employees and other stakeholders whose interests are not being advanced at all by professionals who are the only winners in protracted litigation.



before embarking on a lengthy and expensive witch hunt against people and entities all over the globe, several of which are governed by foreign law. If the Court is inclined to grant the Committee's motion, the Access Respondents respectfully urge the Court to (a) bifurcate the issue of the relevant entities' solvency and adequacy of capitalization as of December 20, 2007 (the "Financial Condition Issue")2 from all other issues in the case; and (b) to set an expedited discovery and trial schedule on the Financial Condition Issue. The Financial Condition Issue is a predicate for, and a "gating issue" with respect to, at least 14 of the 21 counts of the Committee's Proposed Complaint, and the Access Respondents believe that this approach is in the best interests of the Debtors and their estates and is most consistent with the interests of efficient judicial administration. FACTUAL BACKGROUND 5. On June 15, 2009, the Committee filed a 137-page Proposed Complaint together

with its motion for standing. In its Proposed Complaint, the Committee disparages the intentions of the Access Respondents by making unfounded attacks that are contradicted by the results of their own fact finding mission. In a sign of desperation, the Committee tries to insinuate that careful corporate and tax planning reviewed by some of the country's top legal, tax and financial advisors somehow makes a $32 billion public M&A transaction suspect. At bottom, however, the Committee's case turns on a few negative inferences its lawyers try to draw as to the reasonably foreseeable viability of the combined company produced by the Merger. 6. The Committee's Proposed Complaint contains a hodge-podge of putative claims

against 57 named defendants and two proposed defendant classes. It follows an enormously expensive, substantially over-budget "investigation" designed to maximize professional fees and
This issue permeates the Proposed Complaint. See, e.g., Proposed Complaint, ¶¶ 267, 275, 284, 290, 297, 302, 309, 315, 327, 332, 337, 371, 395, 403.


minimize fact finding. The Committee's professional fees in these chapter 11 cases are, it appears, upwards of $10,000,000 in just the first four or five months before any litigation has even commenced. Indeed, the lawyers for the Committee have already run up in excess of $1,500,000 (plus financial advisory and expert fees) just preparing the Proposed Complaint before taking even a single deposition, unabashedly blowing through the $250,000 cap on investigating the Merger imposed by the cash collateral order. And they did this without ever coming back to this Court even to provide a status update on their fees run amok. In further wasteful maneuvers, consistent with its pre-conceived "investigation," the lawyers for the Committee repeatedly sought to prevent witnesses from explaining the facts surrounding the Merger, and canceled a number of scheduled depositions when it appeared that the testimony was providing too much evidence that contradicted their pre-determined thesis. Unless a

structured approach is imposed on the professionals, the costs to the Debtors' estates (and Access, which has already lost billions) will continue to weigh down this reorganization effort like a ball and chain. 7. It is perhaps not surprising that the Proposed Complaint addresses only a small

fraction of the voluminous evidence that the Committee gathered in its investigation. What is notable, however, is the extent to which the Proposed Complaint is built largely upon snippets of documents that have been knowingly taken out of context and that, in many instances, have been thoroughly and consistently explained in the eight depositions that the Committee chose to take before terminating its deposition program. In the Proposed Complaint, much of which was drafted well before the Committee completed its "investigation," the Committee simply ignored massive amounts of evidence contradicting its pre-determined thesis, including compelling and uncontradicted testimony from a representative of the financial advisor to Access and Basell and


from the Debtors' former CEO concerning the financial analysis supporting the Merger and the unprecedented economic environment which beset the company in 2008. 8. Contrary to the inferences the Committee hopes to have drawn from its Proposed

Complaint, Access had no incentive to participate in a transaction that was doomed to fail. As the owner of Basell before the Merger, having succeeded in substantially deleveraging the business, Access put at risk its very valuable asset by contributing it to the Merger. It did so after carefully vetting the proposed transaction with the assistance of expert financial advisors. The notion that Access would risk an asset worth billions of dollars in order to obtain millions of dollars of fees and legitimate profits from publicly disclosed shareholdings defies common sense and, more importantly, a monolithic evidentiary record. No quantity of pithy internal emails deliberately taken out of context can disguise the basic inescapable fact that the conduct that the Committee alleges with respect to Access would be economically irrational. 9. Similarly, while the financial institutions named as defendants are certainly more

than capable of speaking for themselves, the notion that they provided billions of dollars of financing to a deal they knew would fail seems patently absurd. The Committee asserts that the banks agreed to fund an obviously flawed deal without proper supporting financial analysis because they stood to earn substantial fees on the Merger and did not plan to retain the debt they agreed to issue on their books. This assertion is directly contradicted by deposition testimony that the Committee obtained in its Rule 2004 investigation but omitted because it blurred the hindsight vision the Committee had already decided to put forward. 10. The internal concerns raised by Access personnel concerning the Merger are

typical of due diligence processes which accompany major M&A deals. As carefully and thoughtfully explained by every witness whom the Committee chose to question on the subject


(at least when the Committee's lawyers let the witness give complete answers as opposed to instructions to "Just answer yes or no – did you send that e-mail" (scolding the witness for trying to provide the context)), any internal questions surrounding the transaction were related to price relative to potential upside as an equity investor, and not to the ability of the combined company to service its debt. All of the financial analyses performed by Access and its financial advisors, as well as the financial analyses performed by the financing banks of which Access is presently aware, indicated that, on foreseeable economic and business scenarios, the combined company would be able to service its debt even under drastic stress-test conditions. 11. The undisputed fact, already confirmed in discovery but obvious even without a

discovery process to pretty much everyone, is that 2008 was a disastrous year for the global economy generally and a catastrophic one for the chemicals industry in particular. The year 2008 was fairly described as a "perfect storm squared" for reasons that have already been explained to this Court in other proceedings in these chapter 11 cases and undoubtedly will be further explained as this case progress. The prevailing economic conditions affecting the merged company in 2008 – and especially in the second half of the year – were neither foreseen nor foreseeable. ARGUMENT 12. Bifurcation to try the Financial Condition Issue under an expedited discovery and

trial schedule is consistent with the Second Circuit's Commodore standard. 13. Under the prevailing Second Circuit test, the Committee may acquire standing to

pursue claims asserted in the Proposed Complaint "if (1) the Committee has the consent of the debtor in possession or trustee, and (2) the court finds that suit by the committee is (a) in the best interest of the bankruptcy estate, and (b) is necessary to the fair and efficient resolution of the


bankruptcy proceedings." Commodore Int'l Ltd. v. Gould, 262 F.3d 96, 100 (2d Cir. 2001). See also Banque Nationale de Paris (Canada) v. Murad (In re Housecraft Indus. USA, Inc.), 310 F.3d 64, 71 (2d Cir. 2002). 14. Most of the Committee's claims turn in the first instance on the Financial

Condition Issue. If the Committee cannot satisfy its burden of showing that the merged company was insolvent or inadequately capitalized at the time of the Merger (without the benefit of 20/20 hindsight), most of its claims fail without further inquiry, and the Court can determine whether the remaining actions should continue to be pursued in light of the failed overarching thesis. 15. The Financial Condition Issue turns, the Access Respondents believe, on a

relatively discrete set of documents (most or all of which have already been produced in the Rule 2004 testimony), the testimony of a limited group of fact witnesses (a number of whom have already been deposed), and expert testimony. The Access Respondents therefore believe that the Court should, in the interest of the efficient administration and cost control of these chapter 11 cases and the sound administration of its docket, condition any grant of standing to the Committee on a scheduling order that (a) bifurcates the Financial Condition Issue from other issues in the case; and (b) sets an expedited discovery and trial schedule on the Financial Condition Issue. RESERVATION OF RIGHTS 16. The Access Respondents expressly reserve their right to amend or supplement this

limited objection and to introduce evidence supporting this objection at any hearing relating to the Committee's motion. The Access Respondents further reserve their rights to assert any and all available defenses to the Proposed Complaint, as and when authorized and served, including


numerous defenses that exist even if the Committee were to prevail on the Financial Condition Issue.

CONCLUSION 17. For the foregoing reasons, in the interests of equity, prudence, and in light of the

Court's experience in numerous other cases, the Access Respondents respectfully request that the Court condition the Committee's standing on the basis of its satisfying its burden of proof on the Financial Condition Issue on an expedited basis. Dated: New York, New York July 7, 2007

QUINN EMANUEL URQUHART OLIVER & HEDGES LLP By: ___Susheel Kirpalani________ Richard I. Werder, Jr. Susheel Kirpalani Andrew J. Rossman Peter Martino 51 Madison Avenue New York, New York 10010 Telephone: (212) 849-7000 Facsimile: (212) 849-7100 Attorneys for Access Industries, Inc., et al.