In re Chemtura Corp.

Chemtura Corporation and 27 of its affiliates (debtors) filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. The debtors secured the valuation expertise of Lazard, which used discounted cash flow, comparable companies, and precedent transactions as its analytical methods. Giving weight to each method as an independent indicator of value, Lazard arrived at a range of $1.9 billion to $2.2 billion for the debtors’ total enterprise value (TEV). A settlement was negotiated between the debtors, the official committee of unsecured creditors (the creditors’ committee), an ad hoc committee of bondholders (the bondholders’ committee), and the Pension Benefit Guaranty Corporation. The settlement valued the debtors’ TEV at $2.05 billion, the midpoint of the range estimated by Lazarus. However, the official committee of equity-security holders (the equity committee) employed its own valuation expert, UBS, which provided an estimate of $2.2 billion to $2.7 billion. UBS also employed discounted-cash-flow, comparable-company, and precedent-transaction analyses, but the latter two were used only as a means of confirming the discounted-cash-flow analysis. As an alternative to reorganization, the equity committee attempted to market Chemtura to potential investors using the UBS valuation, but these attempts were unsuccessful. Two witnesses for UBS testified at the valuation hearing, and both were repeatedly impeached for inconsistencies. The submitted reorganization plan used the $2.05 billion figure from the settlement. The equity committee objected, claiming that the TEV was too low and that the creditors were receiving too much in relation to the equity holders.