UPDATE 3-Lyondell wins OK of big bankruptcy creditor pact

* Judge approves Lyondell $450 mln settlement

* Judge: settlement overwhelmingly in estate's interest

* Lyondell seeks creditor approval of reorganization plan

* Lyondell targets April 23 for plan's approval (Adds Lyondell comment)

By Emily Chasan and Jonathan Stempel

NEW YORK, March 11 (Reuters) - LyondellBasell [ACCEIN.UL] won court approval on Thursday for a $450 million settlement to resolve litigation with creditors over its 2007 leveraged buyout, and pave the way for the big chemical company to emerge from bankruptcy.

Lyondell said it now plans to seek acceptance from creditors for its reorganization plan, and begin a $2.8 billion rights offering to provide more liquidity and help fund its emergence from Chapter 11, perhaps this year.

The company filed for bankruptcy in January 2009 amid a sudden cash crisis under the weight of billions of dollars of debt, and a recession-driven decline in global demand for petrochemicals.

Last month, Lyondell said it had gained support from its unsecured creditors for the $450 million settlement, which increases the amount these creditors could recover.

In exchange, the creditors agreed to drop a $22 billion lawsuit against the banks, advisers and executives who put together Lyondell's leveraged buyout by Basell. The suit alleged that the transaction effectively set the company up to fail.

"The settlement is overwhelmingly in the best interests of the estate," Judge Robert Gerber said at a hearing in Manhattan bankruptcy court. He overruled two objections to the accord, including one by oil company ConocoPhillips (COP.N).

The settlement could end months of sparring, including intercreditor litigation that Gerber said paralyzed the company's ability to exit bankruptcy. It also has the support of bondholder trustees.

"You can see the negotiation fatigue I think on the faces of every lawyer in this courtroom," George Davis, a lawyer for Lyondell, said at the hearing.

A company spokesman, David Harpole, said Lyondell hopes to win Gerber's approval of what it considers a "clearly confirmable" reorganization plan at an April 23 hearing.

PRIVATE EQUITY, BLAVATNIK

Earlier this week, Lyondell rejected a takeover bid from India's Reliance Industries Ltd (RELI.BO) that valued the company at $14.5 billion. It said it will seek court approval to submit its own reorganization plan for a creditor vote.

According to a disclosure statement filed on Monday, private equity firms Apollo Management LP [APOLO.UL] and Ares Management, along with holding company Access Industries, have agreed to back the $2.8 billion rights offering under which Lyondell would issue 263.9 million Class B shares.

Investor Len Blavatnik led the 2007 buyout through Access, which is based in New York. He will seek a stake of as much as 15 percent in a reorganized Lyondell, a person familiar with the matter said on Wednesday. [ID:nN10150168]

In addition to overruling ConocoPhillips' objection to the settlement, Gerber overruled an objection by what he called a "splinter" group of bridge loan debt purchasers.

He accused both of trying to "cherry-pick" what they did not like, while reserving their ability to avail themselves of parts of any bankruptcy resolution they preferred.

Gerber said ConocoPhillips at best might raise its objection to confirmation of Lyondell's reorganization plan, not the settlement.

Lyondell plans to list new shares on the New York Stock Exchange after it emerges from bankruptcy.

The case is In re: Lyondell Chemical Co, U.S. Bankruptcy Court, Southern District of New York, No. 09-10023. (Reporting by Emily Chasan and Jonathan Stempel; Editing by Bernard Orr and Steve Orlofsky)