Lyondell Chemical Co. settled a lawsuit brought by its unsecured creditors against bank lenders to help the chemical company reorganize in bankruptcy. The creditors don't support the agreement.

The settlement, which still needs court approval, resolves a lawsuit brought by the creditors on behalf of Lyondell against the company's bank lenders related a 2007 buyout, Lyondell spokesman David Harpole said in a phone interview.

Creditors' lawyer Steven Pohl said while his clients don't support the deal, under bankruptcy law Lyondell owns the creditors' claims and has the right to settle.

“Its especially unusual on the eve of a trial for the debtor to come in and settle when the parties have spent four months getting ready for trial,” said Pohl in a phone interview.

The proposed settlement would give the creditors a cash payment of $300 million when Lyondell exits bankruptcy, and establish a litigation trust to fund lawsuits against third parties. The accord was reached after a mediator, whose appointment was announced Nov. 9, failed to resolve the dispute, Harpole said.

“This clears the path for us to move forward with filing an amended disclosure statement and exiting bankruptcy,” Harpole said.

Lyondell's creditors and lenders accepted the appointment of mediator Myron Trepper “for the purpose of facilitating settlement discussions,” U.S. Bankruptcy Judge Robert Gerber said in court papers filed Nov. 9. The lawsuit, filed July 22, sought a trial to determine damages.

The lawsuit claimed Lyondell's 2007 buyout, financed with $22 billion in borrowings, left the company with too much debt and caused it to fail a year later. The suit names Lyondell's parent, Netherlands-based LyondellBasell Industries AF, and banks including ABN Amro Bank NV, Citibank NA, Goldman Sachs Group Inc., Merrill Lynch & Co. and UBS AG.