UPDATE 2-Judge says Lyondell creditors can sue banks, execs

* Judge lets creditors proceed with $22 bln suit

* Judge says suit will be accelerated

* Company in preliminary talks on exit financing (Adds comments from LyondellBasell, Access, paragraphs 8-9)

By Emily Chasan

NEW YORK, July 21 (Reuters) - A U.S. bankruptcy judge said creditors of bankrupt Lyondell Chemical Co [ACCELC.UL] can proceed with a lawsuit seeking to recover as much as $22 billion in alleged damages from the 2007 leveraged buyout of the company by Basell.

Judge Robert Gerber, of the U.S. Bankruptcy Court for the Southern District of New York, said on Tuesday the suit should proceed on an accelerated timeline that would allow the company to continue with its plans to emerge from bankruptcy before 2010. "It is so important that this estate survive," he said.

Lyondell's official committee of unsecured creditors is seeking to sue those who negotiated, planned, financed and carried out the $12.7 billion merger, including banks, advisors and managers of the company.

In court papers, the creditors have argued the merger was undertaken to achieve savings and lead to new business opportunities, but due to the leveraged buyout, the merged company was "plagued" with difficulties and liquidity issues from the very beginning.

The U.S. units of LyondellBasell filed for bankruptcy protection in January, as it struggled with its debt load as demand dropped for petrochemicals products during the global economic downturn.

LyondellBasell [ACCEIN.UL], the Luxembourg-based holding company, is owned by investor Len Blavatnik through New York-based Access Industries.

Lyondell had said in court on Tuesday that it did not object to the creditors committee bringing some of the claims, as long as the litigation did not impede its reorganization. It had asked the court to delay its decision on whether the committee could sue the company's managers and Blavatnik for breach of fiduciary duty and mismanagement, but Judge Gerber said the committee could go ahead with the entire suit.

In a statement after the hearing, LyondellBasell said it remained optimistic the parties to the lawsuit would resolve their differences in a timely manner.

Access said it was pleased the judge would require the case to proceed expeditiously. "This will help to protect the estate from the potential of missing deadlines contained in the debtors' financing agreements," said an Access spokesman.

FINANCING EXPIRES IN DECEMBER

The company's debtor-in-possession (DIP) bankruptcy financing loan is set to expire in December, and Lyondell is not seeking an extension of the loan at this time, Deryck Palmer, a Lyondell bankruptcy attorney at Cadwalader, Wickersham & Taft, said during the hearing.

Palmer said Lyondell was not seeking an extension of the loan, which ranks among the largest DIP loans in history, because it had been told such an extension would be very expensive and also require 100 percent agreement among the company's 700 DIP lenders.

But Lyondell's creditors' lawyers said they wanted to see a resolution to the litigation before the company seeks their approval for a bankruptcy reorganization plan.

Some creditors lawyers also claimed the company was largely seeking to protect its managers and Access because it views Access as a likely source of bankruptcy exit financing, or a rights offering that would fund its exit.

Palmer said in court that Lyondell has had preliminary discussions with a number of potential partners on funding for a bankruptcy exit, but it would be premature to assume Access or Apollo Management LP [APOLO.UL], one of the company's main investors, would lead its bankruptcy exit financing.

The case is In re: Lyondell Chemical Co, U.S. Bankruptcy Court, Southern District of New York, No. 09-10023. (Reporting by Emily Chasan; Editing by Tim Dobbyn)