Len Blavatnik’s LyondellBasell Trade Is Becoming Legendary
In recent years, hedge fund managers like John Paulson and David Tepper, have pulled off some of the greatest trades of all time by doing things like betting against mortgage-backed securities and buying beaten-down banks stocks. But a new trade is emerging that might belong on the list of incredible financial moves of this era.
Len Blavatnik’s LyondellBasell trade is growing more legendary by the day. In 2010 Blavatnik’s Access Industries bought shares in LyondellBasell as the chemicals producer was emerging from bankruptcy court in private transactions with former creditors, on the Pink Sheets, and ultimately on the New York Stock Exchange. In total, Access put on a $1.8 billion trade on LyondellBasell. Today, that bet is worth $6.17 billion in mostly unrealized gains–Access sold some $440 million of LyondellBasell stock last year and also collected some rich dividends. That’s a 243% return.
Part of what makes this trade so incredible is that unlike the hedge fund firms run by Paulson and Tepper, Access’ investment funds belong to one man. Blavatnik is Access and all of the $4.37 billion in paper and realized profits belong to him. That profit alone would make Blavatnik the 242nd richest man in the world. It’s more than the estimated net worth of Leon Black and another man who pulled off a legendary trade, Paul Tudor Jones.
Private Equity billionaires like Black, Marc Rowan and Josh Harris, sometimes are able to make three times their money in two-plus years on billion-dollar positions, but most of the money they bet does not belong to them, rather it belongs to their firm’s investors. Indeed, funds run by their Apollo Global Management have made an absolute killing on LyondellBasell, too.
The other incredible thing about Blavatnik’s LyondellBasell trade is that it is the second time he has bet on the company. The first time did not go very well. In 2005 Blavatnik purchased Dutch chemicals producer Basell in a $5 billion leveraged buyout, putting down $1.1 billion in the deal. Two years later he got Basell to do a $20 billion debt-fueled deal for Lyondell. When LyondellBasell filed for bankruptcy court protection in early 2009, Blavatnik lost his entire first investment in the company.
Exactly how much Blavatnik lost is at the center of a court fight that has been dragging on for years. Creditors claim in a long-running lawsuit that Blavatnik knew when he first put the company together that there was too much debt on LyondellBasell, adding that Blavatnik’s loss was mitigated by $463 million in dividends and management fees that Blavatnik received from Basell before it bought Lyondell. At the very least, Blavatnik netted $1.2 billion in realized losses, part of which was the result of $640 million total return swap on LyondellBasell’s debt.
But Blavatnik claims his losses were much larger, pointing to his equity stake in Basell that he put up as part of the Lyondell purchase, worth between $5 billion and $10 billion, according to a Citigroup valuation put together in 2007. Blavatnik also has a Goldman Sachs recapitalization proposal that shows he could have instead paid himself a $1.8 billion dividend. “I am still way underwater compared to what I lost,” Blavatnik told me two years ago. “The claim that I would have contributed Basell to a deal I knew would fail makes no sense.”
Still, there is no debate right now over Blavatnik’s decision to double down on LyondellBasell, a decision he made after the company handed him his worst business defeat.