# Weisfelner v. Blavatnik (In re Lyondell Chemical Co.)

> United States Bankruptcy Court, S.D. New York · April 21, 2017 · 567 B.R. 55

URL: https://www.frixlaw.com/law-library/cases/8500456

## Case

- **Full name:** IN RE: LYONDELL CHEMICAL COMPANY, Debtors. Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust v. Leonard Blavatnik, Defendants Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust v. NAG Investments LLC
- **Court:** United States Bankruptcy Court, S.D. New York
- **Decided:** April 21, 2017
- **Citations:** 567 B.R. 55
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Glenn
- **Judges:** Glenn
- **Cited by:** 16 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/8500456

## How later opinions describe it (automated extraction)

- explaining reasons for finding Maxwell not credible

## Opinion text

MEMORANDUM OPINION AND ORDER AFTER TRIAL
MARTIN GLENN, United States Bankruptcy Judge
TABLE OF CONTENTS
I. Introduction... 61
A. Blavatnik, the Companies, and the Merger ... 62
B. The Trustee Failed to Establish that Lyondell was Insolvent on Two Key Dates... 63
C. The Trustee Also Failed to Establish that an Actual Fraudulent Transfer Occurred ... 65
D. The Bulk of the Trustee’s Remaining Claims Fail.... 66
II. Procedural History.... 67
III. Jurisdiction and Venue... 68
IV. Findings of Fact... 68
A. Access and Leonard Blavatnik ...69
B. Access Acquires Basell ... 70
C. Access’s Early Interest in Merging Basell with a Refining Company.... 71
D. Access Acquires the Toehold Position and Enters into Negotiations with Lyondell.... 73
E. Lyondell Produces the Refreshed Projections... .73
F. Access Offers $48 per Share for Lyondell ... 76
G. The Merger Agreement is Executed....77
H. Post-Execution, Pre-Closing Developments ... 77
I. The Merger/LBO Financing.... 78
J. The Merger Closes ... 79
K. Post-Closing at LBI ... 81
L. The Banks’ Projections ... 87
M. Expert Testimony Regarding Lyondell’s and CMAI’s -Projections ... 91
N. Expert Testimony Regarding Solvency.. . .98
V. Legal Standards... 107
A. Constructive Fraudulent Transfer. ...107
B. Intentional Fraudulent Transfer. ...114
C. Preference.... 118
D. Breach of Contract.... 121
E. Breach of Fiduciary Duties Under Luxembourg Law.... 123
VI. Discussion.... 132
A. Constructive Fraudulent Transfer. ,..132
B. Intentional Fraudulent Transfer. ...142
C. Preference.,.. 148
D. Breach of Contract.... 149
E. Claims Under Luxembourg Law....161
VII. Conclusion.., 159
I. INTRODUCTION
Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust 1 (the *62 “Trustee”), seeks to recover billions of dollars from Access, 2 related entities, and employees, in this litigation on behalf of LyondellBasell creditors. The Trustee’s claims arise out of the merger of Lyondell and Basell, orchestrated by Len Blavatnik’s Access.
The parties narrowed the issues to be tried upon the submission of a joint pretrial order. (EOF Doc. # 848.) The Trustee brings claims alleging: (i) actual fraudulent transfer; (ii) constructive fraudulent transfer; (iii) avoidable preference; (iv) breach of contract; and (v) breach of fiduciary duty and tort claims under Luxembourg law, with aiding and abetting under Texas law. Opening arguments took place on October 17, 2016. At trial, direct testimony was' offered, primarily by written declarations with in-court cross examination, but also through live witnesses and deposition designations. After trial, the Trustee and the Defendants submitted detailed proposed findings of fact and conclusions of law. (See ECF Doc. ## 906-09.) The Court heard closing arguments on February 2, 2017.
A. Blavatnik, the Companies, and the Merger
Len Blavatnik is the founder and chairman of Access, and the owner (either directly or indirectly) of 100% of Access and numerous related companies. The Access group of companies acquired Basell, a Netherlands-based petrochemicals company, in 2005. The parties disputed Basell’s exact equity value at trial, but Basell was undisputedly worth billions of dollars. Soon after acquiring Basell, Blavatnik began to pursue combining Basell with an American refining company, with the goal of developing Europe-based Basell into a global petrochemical and refining company. Blavt-nik and his associates identified Lyondell as a compelling target.
Numerous Defense witnesses testified that the “industrial logic” and “strategy” of the Basell-Lyondell merger were sound: Basell was the world’s largest supplier of polypropylene and advanced polyolefin products, and a European leader in production of polyethylene. Lyondell was the largest U.S. producer of ethylene and had recently assumed full ownership of a large oil refinery in Houston. Access and Basell considered Lyondell a good strategic fit for a combination with Basell, and anticipated significant synergies upon combining the two companies.
Access and Basell made an offer to acquire Lyondell in 2006, which was rejected. After unsuccessfully bidding on Lyondell’s competitor Huntsman in 2007, Blavatnik and Access again focused on acquiring Lyondell. On May 9, 2007, an Access affiliate acquired a toehold position in Lyondell stock in advance of a potential merger. In June 2007, Blavatnik met with Lyondell CEO Dan Smith to discuss the proposed merger; after discussions between the two executives and within Basell management, Blavatnik eventually offered $48 per share to acquire Lyondell. In July 2007, Lyondell provided non-public due diligence materials, including refreshed projections, to Access, Basell, and a group of financing banks. Over several days in July, including all-day meetings over the weekend of July 14 and 15, Access, Basell, and the Banks conducted due diligence on the potential merger and received presentations from *63 Lyondell management about its business and the refreshed projections. By this time, Access, Basell, and the Banks had already been monitoring Lyondell’s performance for at least a year in connection with a possible merger.
On July 16, 2007, the Merger Agreement was signed and the Banks committed to fund the merger at a price of $48 per share. Access would contribute all of Ba-sell’s equity to the Merger, and Basell and Lyondell would be combined to form Lyon-dellBasell Industries AF S.C.A. (“LBI”). In August 2007, an Access affiliate acquired additional Lyondell stock, bringing the total toehold position to 9.84% of Lyon-dell’s outstanding shares. In September 2007, several months after the signing of the deal, Lyondell disclosed that it would miss its EBITDA projections for the third and fourth quarters, primarily because of rising feedstock prices. But Access, Basell, and the Banks were all satisfied that the fundamentals of the Merger remained sound, particularly because Basell was outperforming its own projections.
The Merger closed on December 20, 2007. The Merger financing totaled $20.3 billion, and left LBI with approximately $2.3 billion of liquidity at the Closing Date.
LBI was buffeted by a series of unplanned and, to some extent, unforeseeable events in the year after the Merger, including a deadly crane collapse and two unusually destructive hurricanes at its Houston refinery, wildly fluctuating oil prices, and the effects of the Great Recession at the end of 2008. LBI filed for bankruptcy protection under chapter 11 on January 6,2008.
B. The Trustee Failed to Establish that Lyondell was Insolvent on Two Key Dates
The Trustee argues that the payments made to Blavatnik-owned entities on account of the pre-merger Toehold investment Blavatnik made in Lyondell stock are constructively fraudulent transfers. The Trustee also argues that loan repayments made in October 2008 on a drawn-down revolving credit facility, totaling $300 million, were preferential transfers. Essential to the Trustee’s constructive fraudulent transfer claims and preference claim are proving that LBI was insolvent on December 20, 2007, when the Merger closed, as well as on October 16, 17 and 20 of 2008, when the loan repayments were made. So naturally, questions of solvency and capital adequacy were a central focus of this trial. The cornerstone of the Trustee’s case is the assertion that the refreshed projections, prepared in response to Blavatnik’s acquisition of the Toehold position, were fraudulently prepared and wildly inflated, and resulted in a combined company that was predestined to fail. In essence, the Trustee argues that a merger based on these refreshed projections necessarily left LBI with inadequate capital. The Trustee, however, failed to prove his case.
1. The Trustee Failed to Prove Insolvency on December 20, 2007
At trial, the Trustee called both industry experts, who attempted to cast the refreshed EBITDA projections as egregiously overstated, and financial experts, who attempted to paint the entire merger as loomed from the very beginning. But as evidence was presented at trial, serious flaws with the Trustee’s experts were exposed, rendering the Trustee’s experts’ testimony largely unreliable. First, the Trustee’s industry experts, CMAI, utilized modeling technology that was aptly characterized by the Defendants as a “black box” that contained hidden assumptions and “proprietary” elements that precluded the Defendants’ experts, and the Court, from fully apprising the methods and mer *64 its of the model. The Trustee’s financial experts, in turn, relied on the questionable analysis performed by the industry experts, but also offered suspect testimony of their own. One of the Trustee’s' solvency experts, in concluding that LBI was inadequately capitalized, cherry-picked a small subset of the many projections that were prepared by the financing banks, and manipulated them in a manner that both contradicted the consensus views of the banks, and misrepresented the actual purpose of those cherry-picked projections themselves. And further, some of the Trustee’s experts’ credibility suffered from the fact that these experts represented different parties at different times throughout the case, and reached fundamentally different conclusions that were in some instances inconsistent, and in others flatly contradictory. On the whole, the Court finds the expert testimony offered by the Trustee to be largely unreliable, and the Trustee’s case floundered without credible expert testimony on these critical issues.
The Defendants’ experts, on the other hand, presented credible testimony and financial projections largely in line with the views of the banks that financed the merger. And indeed, the Court finds the views and analyses of the financing banks to be of great value in this case, just as other courts have looked to sophisticated market participants as persuasive evidence in circumstances such as these. The financing banks risked billions of dollars of their own money on the future of LBI. Testimony at trial established that at least several of the banks had longstanding relationships with Lyondell and Basell, had been tracking the companies for years, and were intimately familiar with the businesses and the industry at large. When the merger eventually came to fruition, the banks supplemented their institutional knowledge of the companies and the industry with non-public information, and each bank employed masses of analysts to scrutinize the merits of the deal. Ultimately, each bank found the merger to be worthy of investment, and received approval from the requisite management and investment higher-ups. The views of these sophisticated investors provided perhaps the clearest indication that the combined company was left with sufficient capital upon the merger closing, given that the financial projections prepared by both Lyondell management and the banks all reasonably showed LBI to be solvent on the closing of the merger.
Moreover, that LBI ultimately failed in a colossal manner just one year after the merger does not necessitate a finding that, under the circumstances, LBI was insolvent at the close of the merger, or thereafter. A number of intervening events ravaged LBI, including the tragic collapse of a large crane at the Houston refinery, two hurricanes, and of course, the Great Recession. While unplanned outages are bound to occur at a refinery sooner or later, the Great Recession took a severe toll on LBI that it simply could not survive. Plunging demand and liquidity issues directly related to the recession were not foreseen by anyone, and indeed, to a large extent, were unforeseeable. Lyondell, Access, the Banks, and industry experts fully appraised the merits of the merger based on droves of public and non-publie information, and decades of industry experience. LBI failed miserably, but the Trustee simply has not met his burden of proof that LBI was insolvent on the date of the merger closing.
2. The Trustee Failed to Prove Insolvency in Mid-October 2008
The Trustee also alleges that three payments totaling $300 million, made on October 16, 17, and 20, 2008, were preferential transfers. The transfers were made in re *65 payment of a $300 million draw on an unsecured revolving credit facility from LBI’s affiliate Access. The draw was made on October 15, 2008, and repaid on the following three business days. Crucial to the Trustee’s preference claim is that he had to show that LBI was insolvent on the dates of the repayment in mid-October 2008. The Trustee’s solvency expert, Maxwell, made a series of severe missteps that significantly undermined his testimony. The Trustee’s insolvency case crumbled under the weight of Maxwell’s errors.
Perplexingly, Maxwell relied on internal LBI projections that were not presented until December 2008 to value the company as of October 2008. That the fortunes of the United States economy, and LBI in particular, changed drastically in those two months is to put it mildly. Maxwell acknowledged at trial that the Great Recession caused a dramatic decline in LBI’s performance in November and December 2008. Maxwell assumed that the December 2008 projections must have been fully drafted by mid-October 2008 — despite failing to identify a single draft before December. Maxwell further assumed that even if projections were drafted in October, those projections would not have been updated by December. The Court finds that it strains credulity to believe that LBI would have fully drafted its projections in October (without producing any record of such drafts), watched the Great Recession begin to unfold all around it, discussed in December the dramatic decline of its business, and yet used the exact same numbers it drafted in October without a single change to reflect the economic decline of the last two months.
Maxwell’s use of anachronistic projections might have been independently fatal to his October 2008 opinion, but he made additional errors that further undermined his credibility. Notably, Maxwell was retained in 2009 by the Creditors’ Committee to critique a valuation conducted by Duff & Phelps in connection with LBI’s proposed DIP financing. Maxwell found a significantly higher DCF value for LBI in 2009, on behalf of the Creditors’ Committee, than he did in 2011, on behalf of the Trustee. Using his 2009 DCF value, LBI was solvent; by 2011, when Maxwell was working on this litigation, he had completely changed his opinion to conclude that LBI was insolvent. Maxwell never adequately explained this inconsistency at trial, attributing the difference in value to a disclaimer in his 2009 work on behalf of the Creditors’ Committee that he was operating on a compressed timeframe. But Maxwell’s change of tune cannot be explained simply by having more time to work — he made significant changes to his methodology, with the result that his opinion had completely changed for litigation purposes.
Combined with additional weaknesses in Maxwell’s testimony described more fully below, the Court has determined that Maxwell’s testimony is unreliable. Without Maxwell’s testimony, the Trustee has no means to prove that LBI was insolvent under the required balance-sheet test. A few emails mentioning the abstract possibility of bankruptcy do not an insolvent balance sheet make. And without proving insolvency, the preference claim fails.
C. The Trustee Also Failed to Establish that an Actual Fraudulent Transfer Occurred
With respect to the Trustee’s actual fraudulent transfer claim, the Trustee relied on a novel theory of the “collapsing doctrine,” attempting to prove a fraudulent intent on the part of pre-merger Lyon-dell’s CEO Dan Smith, and then impute Smith’s intent horizontally to Basell and its ultimate owner, Blavatnik. The Trustee, *66 however, failed to prove actual fraudulent intent by Smith, and accordingly no amount of mental gymnastics can substantiate a recovery on an intentional fraudulent transfer claim brought against Blavatnik, the person who himself lost billions on LBI’s failure.
The crux of the intentional fraudulent transfer claim is that the refreshed projections, prepared by a Lyondell corporate development employee at the behest of Lyondell’s CEO, were completely bogus, and prepared with the intent to defraud creditors. But the evidence at trial established that, while the refreshed projections were prepared over several days with limited input from others at the company, there was simply no basis to conclude that the refreshed projections or any other aspect of the merger were carried out with any intent to delay, defraud, or hinder anyone.
Blavatnik held himself out to be a long-term investor interested in sustained growth over many years. And to be sure, he contributed billions of dollars to the merger in the form of Basell’s equity value. Blavatnik and others at Access stood to manage one of the largest petrochemical and refining companies in the world if the transaction succeeded, but lose big if it failed. He had every reason to scrutinize Lyondell’s refreshed projections and, indeed, testified that it is his experience that sellers’ projections tend to be optimistic.
LBI’s titanic collapse in the wake of the Great Recession was monumental. But no convincing evidence at trial has persuaded the Court that Lyondell’s former CEO, or anyone else, intentionally sabotaged the combined company with baseless financial projections. Smith, who even asked to stay on as CEO of LBI after the merger, cannot be said to have held the requisite intent to support an intentional fraudulent transfer claim. Tellingly, the Trustee gave no legitimate reason why Smith would volunteer to captain a ship he had engineered to sink. And the Trustee asks the Court to believe that the financing banks invested billions of dollars in the doomed company despite seeing an iceberg on the horizon.
Because the Court finds that the Trustee failed to prove any actual fraudulent intent on the part of Smith, it is unnecessary to untangle the Trustee’s wholly unprecedented application of the collapsing doctrine across the table to Blavatnik, Smith’s deal counterparty, who would have ultimately been the victim of any fraudulently prepared projections. The Trustee’s intentional fraudulent transfer claim necessarily fails.
D. The Bulk of the Trustee’s Remaining Claims Fail
The Trustee threw the kitchen sink at the Defendants, alleging breaches of Luxembourg, Texas, and New York law. The Trustee alleges that Blavatnik and other Basell and Access managers breached their duties to pre-merger Basell and post-merger LBI under Luxembourg fiduciary duty and tort law, and that AIH and AI Chemical aided and abetted those breaches under Texas law. The Luxembourg claims fail for the same essential reasons as the constructive fraudulent transfer claims: the Trustee did not prove that LBI was insolvent at the Closing Date, nor even that it was insolvent ten months later in October 2008. Without a showing that the combined company was insolvent, and with no additional evidence that the Defendants mismanaged the companies by pursuing the Merger, the Trustee cannot prove the essential element of “fault.” And without an underlying Luxembourg violation, the aiding and abetting claims must also fail.
Finally, the Trustee alleges breach of contract under New York law, based on Access’s refusal to-fund LBI’s request to *67 draw down the full amount of the Access Revolver in December 2008. The breach of contract claim — in contrast to the Trustee’s other claims — does not require a showing of insolvency or fraudulent intent. The parties dispute only whether the Access Revolver’s MAC clause excuses Access’s non-performance, and if not, the amount of restitutionary damages available. The Access Revolver contained a MAC clause, but, crucially, not an ongoing solvency requirement. The Court has seen no evidence at trial that would warrant rewriting the MAC clause to include insolvency, when the parties clearly did not. Accordingly, the Trustee is entitled to recover restitutionary damages in the amount of $7.2 million, representing the Access Revolver Commitment Fee, minus the benefit paid for and received by LBI.
II. PROCEDURAL HISTORY
The Trustee filed the second amended complaint on September 29, 2011 (the “Second Amended Complaint” or “SAC,” ECF Doc. # 598). 3 The Trustee also filed a complaint against NAG (the “NAG Complaint,” Case No. 11-01844, ECF Doc. #1), grounded in a common set of facts and tried together in connection with these proceedings. The Second Amended Complaint originally contained 21 counts against a variety of defendants, but has since been shaped down to 9 counts, all against Access-related entities and personnel. The original 21 claims variously charge breaches of fiduciary duty; the aiding and abetting of those alleged breaches; intentional and constructive fraudulent transfers; unlawful dividends; and a host of additional bases for recovery under state law, the Bankruptcy Code, and the laws of Luxembourg, under which several of the Basell entities were organized. The Complaint also seeks to equitably subordinate Defendants’ claims that might otherwise be allowed.
Summary judgment on Count 1, a claim for constructive fraudulent transfer related to the Toehold Payments (as defined below), was granted with respect to Toehold Payment 2, and only a potential recovery on Toehold Payment 1 remains. (See Order Granting in Part Nell Limited and Len Blavatnik’s Motion for Summary Judgment on Count 1 and Motion for Partial Summary Judgment on Count 1 of the Amended Complaint, ECF Doc. # 772.) Count 2, a claim for intentional fraudulent transfer, was dismissed and later reinstated after Judge Cote’s July 27, 2016, decision in Weisfelner v. Hofmann (In re Lyondell Chem. Co.), 554 B.R. 635 , 641 n.5 (S.D.N.Y. 2016) [hereinafter “Hofmann ”].
Certain Lyondell directors and officers and the Trustee entered into a settlement and stipulation dismissing the Trustee’s claims against them, resulting in the dismissal of Counts 3, 5, 8, 20 and 21. (See ECF Doc. # 813.) Likewise, Alan Bigman, and Diane Currier, as Executor of the estate of Richard Floor, entered into a stipulation with the Trustee resulting in the dismissal of the claims against them. (See ECF Doe. # 825.) Motions to dismiss Counts 4, 14, 15, 16 and 17 were also granted. (See ECF Doc. ## 696, 697, 700.) A motion to dismiss Count 12, the breach of contract claim related to the Access Revolver, was denied with respect to restitutionary damages, but granted with respect to other types of damages. (ECF Doe. # 697 (the “Count 12 Order”).)
*68 At the commencement of trial, the remaining counts in the Second Amended Complaint were as follows: 4
• Count 1: Constructive fraudulent transfer claims seeking to avoid and recover Toehold Payment 1.
• Count 2: Intentional fraudulent transfer claim seeking to avoid and recover Toehold Payments 1 and 2.
• Counts 6 and 7: Claims under Luxembourg law for tort and “de facto manager” actions
• Count 9: Preference claim seeking to avoid and recover the October repayments under the Access Revolver.
• Count 10: Equitable subordination claim seeking to subordinate AI International’s unsecured claim under the Access Revolver.
• Count 11: Constructive fraudulent transfer claim seeking to avoid and recover fees paid to Nell and Perella Weinberg.
• Count 12: Breach of contract claim seeking restitutionary damages for AI International’s refusal to lend under the Access Revolver in December 2008.
• Count 18: Aiding and abetting breach of fiduciary duty claim against Access (and AI Chemical)
• NAG Complaint: Constructive fraudulent transfer claims against NAG seeking to recover an extraterritorial dividend.
III. JURISDICTION AND VENUE
This Court has subject matter jurisdiction under 28 U.S.C. §§ 157 and 1334(b). Venue of this adversary proceeding is proper under 28 U.S.C. § 1409 (a). This adversary proceeding is a core proceeding pursuant to 28 U.S.C. § 157 (b)(2)(F),(H), and (0). Plaintiff and all defendants that remained parties at the time of trial consented to the bankruptcy court entering final orders and judgments. (ECF Doc. # 848 at 3 (Joint Pre-Trial Order).)
This opinion sets forth the Court’s findings of fact and conclusions of law pursuant to Rule 52(a) and (c) of the Federal Rules of Civil Procedure, made applicable to adversary proceedings in bankruptcy by Rule 7052 of the Federal Rules of Bankruptcy Procedure. The results in this case are very fact-dependent. Therefore, the Court provides extensive findings of fact, including the Court’s resolution of credibility questions. While it is fair to say that none of the participants in these transactions distinguished themselves, at bottom the results in these cases are driven by the Trustee’s failure to prove his claims (except for breach of contract).
IV. FINDINGS OF FACT 5
LBI was a result of the merger of Lyondell with Basell B.V. and its subsidiaries (collectively “Basell” and, such transaction, the “Merger”) on December 20, 2007 (the “Closing Date”). Negotiation of the Merger took place in summer 2007, and a merger agreement was signed on July 16, 2008. (See infra Section IV.G.) Lyondell share *69 holders were paid $48 per share, totaling $12.5 billion. (Bigman Decl. ¶ 82.) Financing for the Merger, totaling $20,313,391,500, was provided by a syndicate of banks led by Goldman Sachs, Merrill Lynch, Citibank, and ABN AMRO. (See infra Section IV.J.l.) Additional financing was provided by UBS. (See infra Section IV.L.) Between the July 16, 2007, signing of the merger agreement and the December 20, 2007, merger closing, market conditions grew increasingly volatile. Crude oil prices — a major driver of costs in the chemical industry-rose from about $65 per barrel to about $95 per barrel. (Bigman Decl. ¶ 74.) As crude oil prices rose, Lyondell’s need for liquidity — but also its ability to borrow under its secured credit facilities — increased. (Id. ¶ 107.) As discussed below, at the Closing Date, the evidence shows that LBI had total liquidity of $2.3 billion. (See infra Section IV.J.2.) The evidence shows that this amount was sufficient for LBI to conduct its business. But during 2008, the world economy foundered. Oil prices .rose to just above $145 per barrel and quickly plummeted to less than $40 per barrel, depleting LBI’s secured borrowing base and tightening its access to credit. (See infra Section IV.K1.) Additionally, LBI suffered a series of business setbacks, including a deadly crane collapse and two destructive hurricanes at its Houston refinery. LBI’s liquidity dwindled as 2008 came to a close, and LBI filed for chapter 11 protection in this Court on January 6, 2009.
A. Access and Leonard Blavatnik
Defendant Leonard Blavatnik founded Access Industries, Inc. (“Access Industries” or “Access”), a New York-based corporation organized under Delaware law, in 1986, and serves as its chairman. (10/21 Trial Tr. (Blavatnik) at 1016:10-22; 1069:12-14; 1079:4-23; 1082:9-12; 1083:23-1084:6.) Blavatnik directly or indirectly owns and controls 100% of Access, including its numerous subsidiaries and affiliates. (Id. at 1069:15-17.) Blavatnik maintains that Access is a long-term investor . and typically favors long-term value over short-term gains. (Blavatnik 2009 Decl. ¶ 5.)
Blavatnik employs a number of individuals at Access who testified at trial. As discussed below, these employees played different roles in analyzing, and in some cases approving, the Merger. Defendant Philip Kassin was the Head of Mergers and Acquisitions and Financing and an Executive Vice President at Access when Access acquired Basell, and when the Merger took place. (10/21 Trial Tr. (Kassin) at 986:20-24.) After the Merger, Kassin was on the supervisory board of LBI. (Kassin Decl. ¶ 2.) Defendant Lincoln Benet was the Chief Executive Officer of Access during the Merger: (Benet Decl. ¶¶ 2, 5.) After the Merger, Benet was on the supervisory board of LBI. (Id. ¶ 4.)
During their depositions and at trial, board members of Basell entities were unsure which board they sat on. (11/1 Trial Tr. (Benet) at 2013:9-14:5 (Benet was “not sure what the formal name of the- [Basell] entity [he was sitting on the board of] was”); 10/31 Trial Tr. (Kassin) at 1751:25-52:10 (Kassin was “not sure” whether, prior to the merger, he was a member of the managing board of Basell GP); 11/2 Trial Tr. (Thorén) at 2419:24-20:8 (Thorén couldn’t recall whether he was “a manager or an executive vice president of [Access Industries Management, LLC]” and whether he was a manager at any time of Basell Funding S.a.r.l.); 11/2 Trial Tr. (Thorén) at 2421:14-21 (Thorén didn’t recall whether he was a manager of NAG Investments, LLC or Basell Funding S.a.r.l.); A. Blavatnik Dep. Tr. at 38:3-20 (Alex Blavatnik saying “Yes, I think I’m— *70 I was or maybe still — I think I was the manager for [Basell Funding S.a.r.1].”).)
Blavatnik, as the ultimate owner of Access and Basell, exercised substantial power over business decisions. Ajay Patel was the former Vice President of Access and worked on matters involving leveraged finance. 6 Patel credibly testified on a number of issues regarding Access and the Merger, including some of the internal mechanics of the Access business and how decisions were made. Patel testified that, though Blavatnik was the ultimate boss, he listened to Access staff, Basell management, and financial advisors such as Merrill Lynch. (10/20 Trial Tr. (Patel) at 876:1-10.) Other Access personnel testified that when Access would provide funds to affiliates and subsidiary companies, relatively small dollar amounts could be approved by the CFO of Access, Richard Storey, without Blavatnik’s approval. However, when transactions involved $500,000 or more, Blavatnik’s approval was required. (11/2 Trial Tr. (Storey) at 2203:4-12.)
B. Access Acquires Basell
In August 2005, Nell, 7 an Access subsidiary, acquired Basell, a Netherlands-based producer of commodity petrochemicals, including polypropylene and polyethylene, for roughly €4.5 billion. At that time, Ba-sell was the world’s largest supplier of polypropylene and advanced polyolefin products, a leading European producer of polyethylene, and a leader in the development and licensing of polypropylene and polyethylene processes and technology. Access affiliates contributed about €860 million in cash for the acquisition, which constituted 20% of the purchase price. The remaining 80% of the purchase price was financed with debt. (Blavatnik 2009 Deck ¶ 3.) Prior to the Merger, Basell owned no refining facilities, though Basell committed to purchase the Berre refinery in France prior to the Closing Date. (10/21 Trial Tr. (Blavatnik) at 993:16-94:10, 1060:21-62:5; see also PX-793.)
Basell B.V. was run by a management board (the “Management Board”) and a supervisory board (the “Supervisory Board”). (Trautz Dep. Tr. at 26, 28-29.) In 2007, Volker Trautz, the CEO of Basell B.V., and Bigman, the CFO, were members of the Management Board, and the Supervisory Board consisted of Blavatnik, as Chairman, Benet, Kassin, and two independent members, Richard Floor and Kent Potter. (Bigman Decl. ¶¶ 28-29, 31.)
In connection with Nell’s acquisition of Basell, certain newly created Luxembourg holding companies, including BIS and Ba-sell AF, were established as part of the corporate ownership link between Nell and Basell B.V. The manager of Basell AF was Basell AFGP S.a.r.l. (the “GP”), and the managers of the GP were Bigman, Floor, Kassin, and Potter, each of whom was on the Management or Supervisory Boards of Basell B.V. (Id. ¶30.)
Following Nell’s acquisition of Basell, Basell appreciated in value, and paid off over €1 billion of debt. (Blavatnik 2009 Deck ¶ 4; Bigman Deck ¶ 42; Benet Deck *71 ¶ 5; Melvani Decl. ¶ 34.) There are differing calculations of Basell’s equity valuation, but it is undisputed that Basell’s equity was worth billions of dollars when the merger with Lyondell was arranged. While Basell did not contribute cash toward the Merger, its equity value supported the equity of the combined companies.
Blavatnik testified that Basell’s equity was worth three to six billion dollars just before the Merger. (10/21 Trial Tr. (Bla-vatnik) at 1126:17-22.) In late 2006, Goldman Sachs calculated that Basell’s equity value was about €2.948 billion. (DX-29 at .008.) In early 2007, Merrill Lynch reached a similar conclusion, estimating a value between $3.9-$4.6 billion. (DX-59 at .008.) In July 2007, Citibank valued Basell’s equity at over $6 billion. (DX-102 at .007.)
C. Access’s Early Interest in Merging Basell with a Refining Company
In 2006, Access and Basell began to evaluate a potential transaction involving Lyondell, believing that a merger between Lyondell and Basell would provide great benefits for the combined company. (Bla-vatnik 2009 Decl. ¶¶ 8-9; Benet Decl. ¶ 7; Bigman Decl. ¶¶ 36-37.): Trautz described Lyondell as a “perfect fit” for Basell “from a strategic perspective.” (Trautz Dep. Tr. at 43:17-23, 46:8-47:10.) Access anticipated that a merger would provide value on account of a more diversified portfolio and a larger global footprint. (Young 2009 Report, DX-804 at 49-54.) Numerous parties, including James Gallogly, who became LBI’s CEO during the chapter 11 cases and retired in 2015, credibly testified that the industrial logic of the Merger was sound. (Gallogly Decl. ¶¶ 3, 11-15; 11/4 Trial Tr. (Gallogly) at 2775-79, 2782, 2784-89, 2792, 2799-2800; see also Frangenberg Decl. ¶¶ 5-11, Kassin Decl. ¶ 5, Vaske Decl. ¶¶ 22-23.) Patel explained credibly at trial that “it made sense to combine the companies.” (10/20 Trial Tr. (Patel) at 899:7-13.)
Lyondell was the largest U.S. producer of ethylene and offered Basell diversification through its polypropylene oxide business and its large refinery and fuels operation. Lyondell was a public company with 253,625,523 shares of common stock outstanding before the Merger, and was traded on the New York Stock Exchange. (PX-362 (Lyondell Proxy Statement, dated 10/12/07 (“Lyondell Proxy”)) at .006-007.) The company pre-merger was made up of three primary business segments: Ethylene Co-Products and Derivatives (“EC&D”); (2) Propylene Oxide and Related Products (“PO&RP”); and (3) Refining. (PX-434 (Lyondell 2007 10-K) at .005.)
Lyondell’s refining division was comprised of a refinery in Houston (the “Houston Refinery”) located on the Gulf Coast of Texas. The Houston Refinery was capable of refining high-sulfur “heavy” crude oil into gasoline, diesel, and other products. Further, the Houston Refinery had been operated as a joint venture between Lyon-dell and CITGO Petroleum Corporation (“CITGO”) since 1993. (PX-362 (Lyondell Proxy) at .0022; PX-254 (Lyondell Management Presentation 7/14/07) at .011; DX-174 (Goldman Credit Memo, 9/07) at .006.)
1. Early Offers to Acquire Lyondell
In the early months of 2006, Merrill Lynch began to advise Access regarding a potential acquisition of Lyondell. (See Frangenberg Decl. ¶ 5; 10/21 Trial Tr. (Blavatnik) at 1003:17-1004:7.) Frangen-berg and other members of the Chemicals Group at Merrill Lynch, based on assumptions provided by Access, constructed a model “designed to project the future operating profit and cash flows of Lyondell *72 and, later on, a combined Lyondell-Basell entity.” (Frangenberg Decl. ¶ 12.)
In April 2006, Access offered a purchase price of $24 to $27 per share of Lyondell stock. (10/21 Trial Tr, (Blavatnik) at 992:6— 14; PX-362 (Lyondell Proxy) at .0022; see also Smith Dep. Tr. at 69:19-23.) In May 2006, Smith advised the Lyondell board of directors of Access’s interest in Lyondell and the offer, but Lyondell’s board rejected the offer, and Smith communicated the rejection to Blavatnik. (PX-362 (Lyondell Proxy) at .0022; Smith Dep. Tr. at 69:19— 70:3.) Access remained interested in acquiring the Houston Refinery.
On July 12, 2006, Blavatnik spoke to Smith and indicated Access’s continuing interest in Lyondell and the Houston Refinery. (10/21 Trial Tr. (Blavatnik) at 994:25-996:15; PX-362 (Lyondell Proxy) at .023.) Soon thereafter, on July 20, 2006, Lyondell and CITGO announced that they were no longer exploring the sale of the Houston Refinery to a third party. (PX-362 (Lyondell Proxy) at .023.) Later, on August 16, 2006, Lyondell acquired the 41.25% interest in the Houston Refinery that it had not previously owned, making the Houston Refinery wholly-owned by Lyondell. (PX-68 (Lyondell 2006 10-K) at .008.) Access continued to analyze the possibility of acquiring Lyondell. (PX-45 (Email from Benet to Kassin, Patel, et al,, re: Hugo Sensitivity Analysis to Downside, dated 7/24/2006).)
On August 10, 2006, Blavatnik and Trautz sent a letter to Smith proposing an acquisition of Lyondell by Basell Holdings at a cash price of $26.50 to $28.50 per share; this offer was also rejected. (JX-2 (Letter from Blavatnik and Trautz to Smith, dated 8/10/2006 (the “2006 Offer Letter”)); Smith Dep. Tr. at 71:2-19; PX-362 (Lyondell Proxy) at .023-024.)
In early 2007, 8 Blavatnik and members of his team at Access again began evaluating a potential acquisition of Lyondell, this time at $38 per share. (DX-44 (Presentation to Athens Regarding Project Hugo, dated 3/19/2007) at .003 (“As discussed, we have analyzed a potential acquisition of Hugo at $38.00 / share”).) In connection with a potential $38 per share offer, Access, through Merrill Lynch, analyzed how the combined company would perform in a variety of scenarios. (See, e.g., DX-56 (ML Supplemental Hugo Analysis, 4/1/07), DX-66 (ML Credit Stress Test, 4/10/07), DX-69 (Presentation to Athens Executive Summary, dated 4/10/2007 (the “Toehold Presentation”)).) At Access’s request, Merrill Lynch ran, among other things, a “credit stress test case” that was intended to “illustrate how — how deep would the [combined] business have to sink to not be able to — to cover its debt service.” (11/1 Trial Tr. (Frangenberg) at 2094:12-16.) The “credit stress test” was run using a share price of $38 per share. (DX-66 (ML Credit Stress Test, 4/10/07) at .015.) In the “credit stress test,” Merrill Lynch tried to model “trough” conditions worse than the 2002 to 2003 trough. (11/1 Trial Tr. (Frangenberg) at 2095:4-6.)
On March 18, 2007, Blavatnik asked Big-man, Kassin and Patel to “give quick comments” regarding the $38 per share offer, (DX-43 (E-mail from Blavatnik to Bigman, Kassin and Patel, Fw: Project Hugo, dated 3/18/2007) at .002.) The next day, Big-man told Blavatnik that with respect to the *73 acquisition at $38 per share, he thought, “the leverage is aggressive,” because “[i]n the downside case we would barely have cash to cover interest in the trough, and if working capital went up (e.g. because of an increase in oil prices) we would be in financial distress.” (DX-43 (E-mail from Big-man to Blavatnik, re: Project Hugo, dated 3/19/2007) at .001.) Similarly, Kassin asked Blavatnik why $38 per share for Lyondell made sense when $28 per share had not. Kassin does not appear to have received a response from Blavatnik, and he did not press the issue and decided to “let sleeping dogs lie.” (10/31 Trial Tr. (Kassin) at 1795:18-1796:1; PX-87 (E-mail Bigman to Kassin re: Deal at $38/share, dated 3/19/2007) at .002.) Trautz also questioned Blavatnik’s willingness to purchase Lyon-dell at $38 per share in an email to Kassin, remarking that “[i]t is not easy to explain Len’s love for [Lyondell]” in response to Kassin’s question regarding “why Len likes this at $38??” (PX-94 (E-mail from Trautz to Kassin re: Important Call/ Meeting re Project.Hugo — Tuesday 27th 1015am EDT, dated 3/24/2007) at .0001.)
On April 1, 2007, Kassin reported Blavatnik’s willingness to go forward with the deal despite the opposition to it. “Also, Len exploring re launching bid for Hugo (which has taken up my entire weekend) against the wisdom of Volker, Access IC (we had face to face last week) and me.” (10/31 Trial Tr. (Kassin) 1800:1-15; PX-102 (Email from Kassin to Lukatsevich re: Welcome Back, dated 4/1/2007) at .0001.)
Despite substantial analysis and modeling on a proposed merger at $38 per share, no deal was consummated at this price.
D. Access Acquires the Toehold Position and Enters into Negotiations with Lyondell
Blavatnik was not prepared to accept Lyondell’s “no” to his $38 per share offer. To up the pressure on Lyondell to negotiate, Blavatnik acquired a substantial position in Lyondell’s stock. An Access affiliate, AI Chemical, acquired the “Toehold Position” in Lyondell on or around May 9, 2007. Specifically, AI Chemical entered into a forward contract with Merrill Lynch (the “ML Forward Contract”) to acquire 20,990,070 shares of Lyondell common stock at $32.11 per share, for a total of about $674.3 million. (Benet Decl. ¶15; JX-5.) The ML Forward Contract gave AI Chemical until May 2008 (or any time before then) to elect either to physically settle the contract or cash out its value. {See JX-5 (Merrill Lynch Share Forward Agreement).)
To consummate the acquisition of the Toehold Position, Blavatnik transferred his 100% interest in AI Chemical to Nell as a capital contribution. AI Chemical’s sole assets were the shares that constituted the Toehold Position, which had a gross value of $1,198,131,360 and a net value, after settlement of the ML Forward Contract, of $523,803,305. Settlement of the acquisition of the Toehold Position was in two payments. The first payment of $523,803,305 (“Toehold Payment 1”) was transferred from non-debtor Basell Funding to Nell pursuant to a Stock Purchase Agreement under which Basell Funding purchased Nell’s 100% equity interest in AI Chemical subject to the terms of the ML Forward Contract. A second payment of $674,328,055 (“Toehold Payment 2”) was paid by LB Finance to Merrill Lynch to settle the ML Forward Contract. {See Reiss 2011 Report, DX-814 Ex. 4-A.) On May 11, 2007, Blavatnik and AI Chemical jointly filed a Schedule 13D disclosing the beneficial ownership of 20,990,070 shares of Lyondell shares (the “13D”). (PX-132 (13D).)
E, Lyondell Produces the Refreshed Projections
A* central focus of the Trustee’s theory of the case is refreshed projections pre *74 pared by Lyondell, at Smith’s direction. The Trustee contends that these refreshed projections were manufactured by Lyon-dell in reckless disregard for the truth, and that they showed billions of dollars of unrealistic future earnings. The Trustee blames Smith for ordering the unrealistic numbers to support a higher acquisition price. It is the alleged misconduct in preparing these refreshed projections that the Trustee seeks to horizontally impute to Blavatnik, even though the Trustee offered no proof that Blavatnik, or anyone associated with him or Basell, had any knowledge of the alleged misconduct. To put the facts regarding the refreshed projections into context, it is important to understand Lyondell’s planning and projections process.
1. The LRP
Each year, company personnel 9 and consultants at Lyondell prepared a long-range plan (“LRP”) to collect data on recent business performance, analyze industry trends, and review corporate strategy, among other things. (PX-66 (2006 LRP).) The LRP would also “define the budget for the coming year, which was the first year of the plan.” (Dineen Dep. Tr. at 35:8-21, 45:9-13.)
The process by which Lyondell prepared the LRP involved an analysis of each individual business segment. The heads of individual business segments, BPAR, the Board of Directors, and others worked together throughout the year to prepare the LRP, but each particular business was responsible for developing projections for costs, margins, prices, volumes, and capital expenditures to assess the performance of the business through a “bottoms-up” approach. (Smith Dep. Tr. at 35-36; DeNicola Dep. Tr. at 30-31; Philips Dep. Tr. at 24-26; see also Twitchell Decl. ¶¶ 11-13; see also PX-66.) Ultimately, data from Lyondell’s different business segments was collected and put into a comprehensive document. (Id.)
Throughout 2006, Lyondell worked to create the 2007 LRP, and on December 6, 2006, the Lyondell Board' of Directors adopted the 2007 LRP (PX-66.), which was the last official LRP produced prior to the Merger. The 2007 LRP, which included EBITDA projections for both the EC&D and Refining segments through 2011, included the following EBITDA forecasts (in millions of dollars):
[[Image here]]
(PX-66 at .002.)
2. The “Refreshed” Projections On May 15, 2007, following Access’s acquisition of the Toehold position, Lyondell
CEO Dan Smith met with Robert Salvin, a member of Lyondell’s corporate development group. (Salvin Dep. Tr. at 30:15-31:6, 41:24-42:3, 179:7-19.) 10 Smith, during this *75 one-on-one meeting, asked Salvin to review the 2007 LRP, and prepare updated projections after collecting information from other Lyondell employees. (Id. at 395-96.) The “refreshing” process came in response to “some of the external events that were going on” (Dineen Dep. Tr. at 40:21-41:25), possibly including “a lot of [merger and acquisition] activity in the industry.” (Id. at 58:24-59:6.) The revised projections were not, however, meant to entail the same “bottoms-up” or detail-oriented analysis that was involved in the production of the LRP. (PX-145 (E-mail from Salvin to Tanner, re: LRP Assumptions, dated 5/15/2007) at .0001.)
Salvin maintains that, among other things, he endeavored to review the then-current EBITDA projections in Lyondell’s refining business, as Lyondell had recently assumed a 100% ownership interest in the Houston refinery. Salvin explained at trial that Lyondell “had changed the way [they] were running the refinery and [they] wanted to take another look at those EBITDA projections” to determine if they should be adjusted. 11 (Salvin Dep. Tr. at 396:11-96:25.)
The refreshing process took place over a compressed timeframe of several days, and involved far fewer employees than the LRP process. (Phillips Dep. Tr. 50:18-54:6; Dineen Dep. Tr. 61:5-65-22.) Salvin, who was not an expert in either the refining or petrochemical fields and did not participate in preparing EBITDA projections for the LRP, claims to have consulted with members of the Lyondell refining and petrochemicals businesses while preparing the revised projections, and the revised projections appear to incorporate at least some information relating to the actual performance of the Houston refinery, in addition to certain assumptions used in the preparation of the 2007 LRP. (Salvin Dep. Tr. 387:5-89:6; see id. at 396:20-25 (“One of the key areas ... was refining .... [W]e had changed the way we were running the refinery and we wanted to take another look at those EBITDA projections that were developed, again, six, seven months earlier.”).)
The Trustee, however, has raised questions about the legitimacy and thoroughness of the refreshed projections and the refreshing process through the deposition testimony of Smith, Salvin, and a number of other Lyondell employees involved in corporate development and finance. (EOF Doc. # 909 at 53-68.) A major thrust of the Trustee’s theory of the case was that the refreshed projections were directed by Smith to support the transaction at an inappropriate and inflated price that materially resulted in bankruptcy. (Id.) The refreshed projections are discussed further below in Section VI.B.1. The testimony in the record establishes that while Salvin did *76 contact other employees on an advisory basis while preparing his refreshed projections over the several days following his May 15, 2007, meeting with Smith, other former Lyondell employees who were deposed disclaimed involvement in the process of refreshing the projections. (See, e.g., Phillips Dep. Tr. at 72:14-24; Teel Dep. Tr. at 101:5-102:5,163:12-17; Dineen Dep. Tr. at 65:9-74:15.)
Ultimately, Salvin prepared the revised EBITDA projections over the course of several days, and the revised projections were included in a presentation given by senior Lyondell personnel to certain financing banks in July 2007. (DX-100; see 11/2 Trial Tr. (Jeffries) at 2230-31.) The revised projections include the following EBITDA figures:
[[Image here]]
(DX-100 at .081.)
F. Access Offers $48 per Share for Lyondell
In June 2007, Trautz met with Smith to discuss a merger. (Trautz Dep. Tr. at 42:18-25.) Smith suggested a price of $48 per share, and Trautz reported this price to Blavatnik. (PX-190; Trautz Dep. 66:10-68:15.)
On July 9, 2007, Blavatnik, on behalf of Basell AF, met with Smith to discuss the purchase of Lyondell. (10/21 Trial Tr. (Bla-vatnik) at 1034:2-9; PX-362 at .026-027 (Lyondell Proxy).) No other parties, aside from Blavatnik and Smith, were present at this meeting. (10/21 Trial Tr. (Blavatnik) at 1035:3-6.) During a phone conversation later that day between Blavatnik and Smith, Blavatnik communicated the $48 per share offer to purchase Lyondell, and Smith agreed to convey this offer to the Lyondell board. (Id. at 1035:21-36:19; PX-362 at .027 (Lyondell Proxy).)
That same day, Kassin told Patel that Blavatnik “wants to do Hugo ... by Monday,” to which Patel answered “[yjou’re joking right?” (PX-210 (E-mail from Kas-sin to Patel, dated 7/9/2007).) According to Kassin, despite advising Blavatnik to take more time to get a deal done, Blavatnik insisted on moving forward with his schedule. (10/31 Trial Tr. (Kassin) at 1804:5-12.) Blavatnik referred to the deal as “the $48 handshake deal that I had made with Dan Smith of Lyondell.” (Blavatnik 2009 Decl. ¶ 17.) Blavatnik testified that it was ultimately his decision, but that he would not have proceeded if the Management Board objected. (10/21 Trial Tr. (Blavatnik) at 1055:14-19; see also A. Blavatnik Dep. Tr. at 16:23-17:4 (Blavatnik makes the ultimate decision).) Blavatnik did not have any written approval from Basell BV or Basell AF, nor from the board of the GP or of Basell BV to enter into an agreement with Smith or to offer the $48 per share price. (10/21 Trial Tr. (Blavatnik) 1039:15-25; see also 10/31 Trial Tr. (Kassin) at 1787:24-88:24.)
After learning about Blavatnik’s $48 per share offer to Smith, Kassin informed Blavatnik he “thought the price was too high.” (10/31 Trial Tr. (Kassin) at 1790:15-22.) Kassin acknowledged that despite his opposition to the deal, the decision was Blavatnik’s to make: “My job is to sign this up ... I will make it happen if I have to kill myself ... the real problem is — I hate the deal at $48 and am scared to death that the banks will ALL want new cash equity ... I am trying to separate my two *77 roles — one deal weasel who will get this signed up in record time ... vs. Board member with fiduciary role for the shareholder ... this one will be tough.” (PX-235 (E-mail from Kassin to Benet, re: are the Hugo guys here on Fri night — maybe for dinner?, dated 7/12/2007).) Kassin later testified that Blavatnik had “drawn a line in the sand” that the transaction would go forward at $48 a share. (10/31 Trial Tr. (Kassin) at 1809:18-10:5.) Kassin testified that he had no idea what went on in his mind and how Blavatnik and Smith had the back and forth to get to 48, but that “Mr, Blavatnik wanted to do it in a very expedited manner.” (Id. at 1790:10-24.)
On July 10, 2007, Bigman expressed his concern regarding the $48 per share offer to Blavatnik, telling him “I know you’ve made up your mind, but I am uncomfortable with the valuation — it’s almost $ 5 billion more than we were offering a year ago and over $ 2 billion more than we were discussion just a few weeks ago.” (DX-114 (E-mail from Bigman to Blavatnik, re: Hugo — Financing, dated 7/10/2007).) The same day, Blavatnik responded “[j]ust see if it’s a good deal now.” (Id.)
The financial analysis performed by Access and Basell, as well as the work of their advisors and banks, “indicated that [LBI] would generate sufficient cash flow to pay interest and make required debt repayments and, indeed, to make substantial voluntary debt repayments during the five-year period covered by [the companies’] forecasts — and would in fact be able to do so even under reasonably anticipated ‘trough’ conditions.” (Blavatnik 2009 Decl. ¶ 15; see Bigman Decl. ¶¶ 61, 65.)
Testimony regarding concerns about acquiring Lyondell at a $48 per share price, according to Blavatnik and others, “related to the possibility that a $48 price gave too much of the potential upside of the merger transaction to the Lyondell shareholders and created a possibility that [Access] would be working for the banks rather than generating a sufficient equity return.” (Blavatnik 2009 Decl. ¶ 15; see Benet Decl. ¶ 8; Bigman Decl. ¶¶ 51-52, 63-64; Kassin Decl. ¶¶ 6, 68-72.) As to the concerns over maximizing returns, the Access and Basell teams ultimately became comfortable with the proposed acquisition despite the fact that it was regarded as paying a full price for Lyondell. (Benet Decl. ¶¶ 18-19; see Trautz Dep. Tr. at 76:9-11 (“We all thought you give away a substantial part of the upside, but okay, it’s the best fit.”).) The issue here, of course, is not whether equity returns would be minimal or none, but whether the combined company, with the proposed capital structure, was or was likely to become insolvent.
G. The Merger Agreement is Executed
The Merger Agreement was signed on July 16, 2007. (JX-8 (the “Merger Agreement”) at .001.) Under the Merger Agreement, Lyondell shareholders were to receive $48 per share. (JX-8 at .010.) The parties to the Merger Agreement were Basell AF, BIL Acquisition Holdings Limited, and Lyondell. (JX-8 at .008.) Approval of the Merger by Basell GP was memorialized by written resolutions. (JX-7 (Basell GP Resolution, dated 7/15/2007).) The managers of Basell GP did not hold a meeting regarding the Merger, By letter dated July 16, 2007, Goldman Sachs, Merrill Lynch, and Citibank committed to participate in the financing of the Merger. (JX-11 (Project Hugo Commitment Letter, dated 7/16/2007 (the “Commitment Letter”)).)
H. Post-Execution, Pre-Closing Developments
On September 11, 2007, Blavatnik became aware that Lyondell would miss its *78 third and fourth quarter earnings projections by a significant margin. (See PX-315 (E-mail from Smith to Blavatnik, re: Ebit-da, dated 9/11/2007) (informing Blavatnik that “3Q is about 700mm and 4Q virtually the same but with different mix”).) Kassin subsequently informed Blavatnik that the original Lyondell EBITDA projections for the third quarter were $818 million. (Id.; 10/31 Trial Tr. (Kassin) at 1845:19-46:14.) Blavatnik responded to Smith that same day, commenting that it was “Quite a change from your team’s projections .... ” (PX-319 (E-mail from Blavatnik to Smith, re: Ebitda, dated 9/11/2007) (ellipsis in original).) Bigman testified that Blavatnik demanded a personal explanation from Smith as to Lyondell’s miss on its projections. (10/24 Trial Tr. (Bigman) at 1287:18— 88:1.)
Around this time, Trautz turned down the position of Chairman of LBI because, in part, he believed that the board would defer to Blavatnik rather than to him were he to take the position of chairman. In his deposition, Trautz stated: “[W]hen we came to the chairman position, I said to Len, ‘Len, this is a privately owned company who has an owner, and it doesn’t make sense to me to sit at the head of the table as chairman and you as the owner sit in the room and discuss something, because it’s natural that everybody would look at you at the end and not at me.’ ” (Trautz Dep. Tr. at 121:22-22:9.)
I. The Merger/LBO Financing
On or about August 14, 2007, pursuant to the ML Forward Contract, AI Chemical irrevocably exercised its physical settlement option to acquire 20,990,070 shares of Lyondell’s common stock. (JX-5; Benet Decl. ¶ 24) On August 21, AI Chemical disclosed the purchase of ah additional 3,971,400 shares in the open market at an average price of $44.21 per share. (see Benet Decl. ¶ 24) Together with the 20,-990,070 shares subject to the ML Forward Contract, AI Chemical held beneficial ownership of 24,961,470 shares, representing 9.85% of all outstanding shares. (JX-16 at .002.)
1. Synergies
After the Merger Agreement was executed, Basell and Lyondell met to discuss synergies. Basell had been estimating $200 million of annual synergies — a “conservative estimate” that was “always considered to be a placeholder until the two management teams from Lyondell and Basell had spent sufficient time together in order to understand their respective cost structures, where their businesses overlap, how to cut head count, how to purchase more efficiently and other potential synergies.” (Melvani Decl. ¶ 42.) After Lyondell missed its third quarter projections, and in anticipation of missed fourth quarter projections, the Merger teams took a collaborative “detailed look,” and the synergy estimate was increased to $420 million annually (Trautz Dep. Tr. at 109:20-10:18, 117:8-18:17) — a number that was still regarded as “conservative” and that was “expected to get more granular over time.” (Melvani Decl. ¶ 42; see Bigman Decl. ¶ 38; Potter Dep. Tr. at 83:7-86:3 (“I think they were being too conservative in their estimates of synergies .... I do not believe they were overstating the synergy estimates at all. Quite to the contrary, I was an advocate of higher synergy capture.”); Trautz Dep. Tr. at 222:16-23:4 (“And the reality is already today much higher and will be higher when we finish the merger.”).)
Patel, former Vice President of Access, testified on the distinction between “hard synergies,” representing tangible benefits such as cutting labor costs, and other synergies, relating to less tangible items like the benefits of making bulk purchases. (10/20 Trial Tr. (Patel) at 914:2-17.) Patel’s *79 testimony came in response to questions about emails from July 12, 2007, where Patel told Blavatnik, Benet, and Kassin that the synergy number presented to the financing banks “can be a ‘reach’ number because this is not in any covenant or other legal document, but merely what we believe is achievable and that can credibly be used for marketing.” (PX-234.)
On September 26, 2007, synergies of $420 million were presented to the banks. (DX-172 at .003, .005 (Basell and Lyondell Bank Meeting Presentation, dated 9/26/2007) (listing “Gross Synergies” of $420 million for each year from 2007 to 2011); see also DX-172 at 033-.036 (identifying “Gross Benefits” of “$420 Million”).)
The testimony established that synergy capture since the Merger has been in the order of $1 billion annually, a number far in excess of the estimates developed in 2007. Specifically, Gallogly, LBI’s former CEO, and others at LBI testified that the majority of those synergies would have been achieved with or without bankruptcy. (11/4 Trial Tr. (Gallogly) at 2788:12-89:20; see also 11/4 Trial Tr. (Gallogly) at 2799-2800; Gallogly Decl. ¶¶ 16-17; Potter Dep. Tr. at 98-99.) Further, Gallogly testified that LBI used the bankruptcy process to reject certain leases, but generally speaking, contracts in the industry were short term, and the bankruptcy process was not required to shed costly and inefficient agreements. (11/4 Trial Tr. (Gallogly) at 2736:23-38:4.) 12
2. The Banks’ Projections
Goldman Sachs, Merrill Lynch, Citibank, ABN AMRO and UBS Securities LLC each committed billions to finance the Merger, and naturally, each bank carried out an in depth analysis of the transaction, analyzing the financial data and projections prepared by Lyondell management, and preparing its own projections. Goldman Sachs, Merrill Lynch, and Citibank, the first to commit to financing the Merger, conducted an intensive diligence review in anticipation of the Merger over several days in mid-July 2007, where the banks were granted access to non-public information about Lyondell’s business and financial performance. These banks each employed dozens of employees to prepare projections modeling a wide variety of scenarios utilizing this new data in connection with publicly available data. ABN AMRO and UBS Securities LLC (“UBS” and, together with Goldman Sachs, Merrill Uynch, Citibank, and ABN AMRO, the ‘[Banks”), who would later join the financing team, also prepared their own projections. The Banks’ projections, the process by which they were prepared, and their ultimate value to the Court are discussed in detail below.
J. The Merger Closes
The Merger closed on December 20, 2007. The Merger involved elements of both a merger and acquisition deal, but also a leveraged finance component more emblematic of a leveraged buyout. But in contrast to a typical leveraged buyout, where a purchasing company borrows funds to buy a company while perhaps contributing some of its own money, 13 *80 here, Basell borrowed funds from the financing banks secured by the assets of the combined company while contributing its own equity to the transaction, resulting in the combination of Basell and Lyondell into LBI, with the financing banks funding the acquisition of Lyondell by Basell.
Pursuant to the Merger Agreement, an indirect merger subsidiary of Basell was merged into Lyondell, and all of Lyondell’s common stock and restricted stock was converted into the right to receive $48 in cash. (JX-8 (Merger Agreement) at .010.) At that time, Basell changed its name to LBI and became, through an intermediate holding company, the corporate parent of Lyondell. (DX-251 at .021.) Citibank prepared a valuation in which it estimated that the value of the “core” Basell businesses (without considering joint ventures) was between about $12 billion and $14 billion — a number that implied substantial equity value. Citibank also estimated that the equity value of LBI ranged from about $10.7 billion to $14.2 billion. (DX-235 (Citibank Valuation Assessment, dated Dec. 2007) at .002, .006.) The Citibank valuation was used to price a management equity buy-in, and key members of management, including Bigman, invested in LBI based on that valuation. (DX-270; Bigman Decl. ¶ 85; see also Twitchell Decl. ¶ 6.)
1. LBI Financing at Closing
On December 20, 2007, LBI, Lyondell, Basell B.V., Basell Finance Company B.V. (“Basell Finance”), Basell Germany Holdings GmbH, and certain affiliates entered into the senior credit facility as borrower or guarantor. Lyondell, with certain subsidiaries of LBI, also entered into the bridge loan facility, and LyondellBasell Finance Company, with certain guarantors, entered into the asset-based facilities.
A number of draws and payments were made in connection with the closing of the Merger (the “Merger Financing”). The sources of funds for the payments made in connection with the Merger, totaling $20.3 billion, were: two term loans totaling $11,156,196,500; a $7,839,945,000 bridge loan; two asset based loan facilities totaling $1,202,450,000; and a $114,800,000 revolving credit facility. (Reiss Report, DX-814 at 19.) These funds were used as follows: $11,256,717,120 payment to Lyondell shareholders; $523,503,305 payment to Nell Ltd on account of Toehold Payment 1; $674,328,055 payment to Merrill Lynch on account of Toehold Payment 2; $7,178,017,071 for the repayment of Lyon-dell debt; $447,127,226 for the repayment of Basell debt; $219,214,201 for the payment of closing costs and professional fees; and $14,184,522 in other unidentified uses. (JX-74 (Closing Funds Flow Memorandum); Reiss Report, DX-814 at 19.) 14
*81 After the Merger, Lyondell’s liquidity and capital resources were integrated with LBI’s, and LBI managed the cash and liquidity of Lyondell and its other subsidiaries as a single group and as part of a global cash pool. (Bigman Decl. ¶ 35.) At closing, LBI had liquidity of about $2.3 billion. (Bigman Decl. ¶ 102; DX-446 at .005.) The $2.3 billion liquidity included a senior secured revolving credit facility, financed by the Banks, in the amount of $1 billion (the “2007 Revolver”). (See JX-45; DX-446 at .001.) The Court finds the evidence of LBI’s $2.3 billion liquidity at closing to be credible.
2. LBI’s Financial Condition on the Closing Date
As noted above, the Merger closed on December 20, 2007. In order to assess LBI’s financial condition at the closing of the Merger, a detailed review of the events leading up to and following the Merger, the projections prepared by management before and in connection with the Merger, and the projections prepared by the financing banks, as well as expert testimony regarding LBI’s financial condition at closing will all be addressed.
LBI’s treasurer Karen Twitchell and CFO Alan Bigman both testified that LBI’s opening liquidity of $2.3 billion was sufficient to operate the business, which sometimes faced day-to-day cash swings of $300 million to $500 million. (Twitchell Decl. ¶¶ 66, 68; Bigman Decl. ¶¶ 99-102.) The Court finds this evidence to be credible.
K. Post-Closing at LBI
LBI faced significant liquidity concerns in the first quarter of 2008. By February of 2008, LBI’s liquidity was $895 million. (10/24 Trial Tr. (Bigman) at 1310:11-22; JX-91 (Liquidity Discussion Slides, dated 4/11/2008) at .002.) Given LBI’s seasonal liquidity needs, LBI expected its liquidity to fall during the first quarter of 2008. (Twitchell Decl. ¶ 69.) The company, however, experienced a greater decline in liquidity during the first quarter of 2008 than anticipated. (Bigman Decl. ¶¶ 105-06.) This was the result of “up-flying oil price[s]” (Trautz Dep. Tr. at 124; see also id. at 126-27 ; Melvani Decl. ¶ 95), but was also related to a greater than anticipated decline in sales, including weak seasonal business activity, merger-related payments, acquisition-related costs such as the acquisition of the Berre refinery and the acquisition of Solvay, and various recurring costs forecasted to occur, but which timing and final amounts were uncertain. (Twitchell Decl. ¶ 70.) In early 2008, LBI’s treasurer became concerned over the amount of available liquidity and about the impact of unanticipated and rapidly rising crude costs. (Twitchell Decl. 1171.)
The ability to borrow up to $750 million on an unsecured basis was contemplated (but not yet committed) by LBI and the banks at the time of the Merger in the form of a debt basket (see JX-45), and on March 27, 2008, LBI, Basell Finance, and Lyondell executed a revolving credit facility (the “Access Revolver”) with Access Industries Holdings (“AIH”), which provided for up to $750 million in revolving credit, and hence corresponding increased incremental liquidity. (JX-51 (“Access Revolving Credit Agreement”); see also Twitchell Decl. ¶ 73.)
Also during this time, LBI looked to a feature of its asset-based facilities to in *82 crease its liquidity. LBI’s asset-backed loan facilities (the “ABL Facilities”) contained an “accordion” feature, which entitled LBI to “upsize” the facilities by $600 million. (see Twitchell Decl. ¶ 53; Bigman Decl. ¶¶ 6, 94.) The ABL Facilities were added at the suggestion of Twitchell, who became LBI’s Treasurer and believed them to be an appropriate source of liquidity based on both availability and cost. (Twitchell Decl. ¶36; 10/25 Trial Tr. (Twitchell) 1562:8-64:4.) All parties to the ABL Facilities understood that LBI intended to use the $600 million accordion to upsize the facilities if the borrowing base increased as a result of escalating feedstock costs, or otherwise, necessitating more liquidity to finance LBI’s increased working capital needs. (Twitchell Decl. ¶ 53; Bigman Decl. ¶ 94.)
In connection with the upsizing of the ABL Facilities, LBI negotiated with the financing banks, and ultimately paid roughly $36 million in fees, and gave up several costly concessions, including a negotiated 3.25% LIBOR Floor on USD-denominated term loan B for a period of three years. (DX-311 (UBS Project Leo Memorandum) at .003; see Tuliano 2009 Report, PX-800 at 96-98.) Additionally, LBI negotiated the payment of half of the original issue discount payment owed, or $125 million of the original $250 million sum. (See JX-54 (Credit Agreement Dated as of December 20, 2007 as Amended and Restated as of April 30, 2008 (“Amended Credit Agreement”)); 10/24 Trial Tr. (Bigman) 1322:4-16.)
By the end of April, with the Access Revolver and the upsized ABL Facilities, LBI had added $1.5 billion of liquidity. Twitchell, LBI’s Treasurer, no longer had the concerns she had articulated earlier in the year. (Twitchell Deck ¶ 83.) According to Blavatnik, LBI’s decisions with respect to what additional liquidity facilities to seek were made by management. (Blavatnik 2016 Decl. ¶ 7.)
In 2008, LBI’s reported liquidity in the first quarter was $1,677 billion as of January 31, $1,025 billion as of February 29, and $1,527 billion as of March 31, excluding $538 million which was to be used to fund the Berre acquisition. (Twitchell Decl. ¶ 77.) By April 30, LBI reported $2,181 billion of liquidity. On May 31, it reported $2,519 billion of liquidity, and, on June 30th, $2,842 billion. (Id. ¶ 86.)
1. Events in 2008 Affecting LBI’s Liquidity
a) Volatility in the Oil Market
Given the asset-based lending facilities in place at LBI, the price of oil greatly affected LBI’s liquidity. Projections prepared by management in 2007 contemplated oil prices in the range of $63 to $69 per barrel. (DX-271 at .012.) The volatility in the price of oil in the summer and fall of 2008 was striking. Oil reached a peak price of $145.29 per barrel on July 3, 2008, then plummeted to less than $30 per barrel. (Tuliano 2009 Report, PX-800 at Appendix C, D; see also 10/20 Trial Tr. (Nebeker) at 828:1-11.) On September 4, 2008, the price of oil was back up to over $100. This undoubtedly had an impact on LBI’s capital position, and the evidence at trial suggests that no one predicted such dramatic volatility in the price of oik
b) Crane Accident at the Houston Refinery
On July 18, 2007, a 30-story crane collapsed at the Houston refinery, resulting in fatalities and an extended outage at the refinery. (O’Connor 2009 Report, DX-800 at 50.) While it is an open issue whether unplanned outages should be accounted for in projecting EBITDA, the Houston crane collapse was not foreseen or, assuredly, foreseeable.
*83 Defendants’ expert O’Connor testified that it is not common industry practice to reduce production or EBITDA projections on account of potential unplanned outages, given that the outages are, by nature, unplanned and entirely hypothetical. (11/3 Trial Tr. (O’Connor) at 2576:23-78:11.) Nebeker’s report for the Trustee, on the other hand, stated that possible unplanned outages should be factored in to a refinery’s projections, and that LBI’s failure to do so resulted in inflated projections. (CMAI 2011 Rebuttal Report, PX-807 at 6.) The Court credits O’Connor’s testimony and rejects Nebeker’s conclusion. A company may miss projections for any number of reasons, but the Trustee failed to prove any credible basis for reducing projections for unplanned outages such as those that resulted from the crane collapse or the two hurricanes discussed in the next section,
c) Hurricanes Gustav and Ike
On September 1, 2008, Hurricane Gustav hit the Houston area. Soon thereafter, on September 13, 2008, Hurricane Ike hit the Houston, refinery. Hurricane Ike caused LBI’s Gulf Coast plants to shut down for 13 days. (O’Connor 2009 Report, DX-800 at 51.)
As noted above, experts testified at trial about the frequency and effects of hurricanes on refineries in the Gulf Coast region. In 2005, Hurricane Rita hit the Gulf Coast region, resulting in unplanned outages at several refineries in the area. (Id. at 3.) Hurricanes Gustav and Ike passed over the” Gulf Coast in 2007, resulting in unplanned outages and reduced production and lower EBITDA for the year,
d) The Great Recession
Gallogly described market conditions in 2008 as “the worst [he has] ever seen it. The sudden slowdown in the economy and destocking of chemical inventories led to a precipitous drop in the demand for chemicals and a sharp drop in sales and profits for LBI and other chemical producers. The value of inventories also collapsed, resulting in sharp losses. It was a crisis time. And no one predicted it.” (Gallogly Decl. ¶ 19.)
Numerous witnesses testified that the Great Recession was not predicted by anyone, and was a strong contributing factor to LBI’s ultimate downfall. (11/2 Trial Tr. (Jeffries) at 2289:19-23 (“Look, as we all know now, looking back in history, the events of 2008, none of us ever predicted. And it was probably — you know, from the financial crisis on down, it was probably the worst events any of us have seen since the Great Depression in the 30s.”); see also 10/20 Trial Tr. (Nebeker) at 824-29; 10/19 Trial Tr. (Witte) at 697-98; Gallogly Decl. ¶ 19.)
Tellingly, the Trustee’s experts, CMAI, in a Chemical Company Analysis 15 issued in April 2009, provided a comprehensive look at LyondellBasell, and presented CMAI clients with CMAI’s views on a number of issues related to LBI, including among others, “a corporate overview that provides an historical review and business structure, a summary of historical/future finances and investments, and overview of acquisitions/divestitures as well as joint venture participation .... ” (DX-463 at 7.) The CMAI report explained: “A flare up of the global financial crisis in September 2008 triggered the onset of the worst global recession since World War II. The combination of plunging, chemical sales and a global credit freeze rendered LyondellBa- *84 sell unable to service its $26 billion of debt by the fourth quarter of 2008.” (DX-463 at 10.)
Attempting to reconcile CMAI’s statements in 2009 with his own testimony on behalf of CMAI at trial, the Trustee’s expert Dave Witte argued that “plunging chemical sales” and the “global credit freeze,” and more generally “the worst global recession since World War II” were only contributing factors to LBI’s downfall. The Court is skeptical of CMAI’s dramatic shift in its opinion for litigation purposes and credits its 2009 analysis as an unbiased contemporaneous review of LBI’s collapse amid the Great Recession.
2. LBI Enters Into, Draws Upon, and Repays the Access Revolver
a) LBI Enters Negotiations in March 2008 with the Banks and Access to Increase its Borrowing Capacity
At the time of the merger, as already discussed, the ABL Facilities contained an “accordion” feature, which entitled LBI to “upsize” the facilities by $600 million (the “Accordion”). (Twitchell Decl. ¶ 53; Bigman Decl. ¶¶ 6, 94.) In early March 2008, Access and LBI entered into negotiations with the Banks regarding funding the $600 million Accordion to create an additional liquidity cushion. (10/24 Trial Tr. (Bigman) at 1319:22-25; see, e.g,, PX-470 (E-mail from Patel re: Latest Bank Machinations,” dated 3/12/2008); PX-490 (E-mail from Twitchell re: Update on Banks, dated 3/20/2008).) The Banks were reluctant to upsize the ABL Facilities under the Accordion unless Access and LBI agreéd to put the Access Revolver in place. (See 10/24 Trial Tr. (Bigman) at 1355:19-25; Bigman Decl. ¶¶ 116-17.)
On March 12, 2008, Access prepared a presentation entitled “Project Aquifer.” (PX-471 (Project Aquifer Presentation, dated 3/12/2008 (“Project Aquifer”)).) Project Aquifer stated multiple objectives including “[p]rovid[ing] solutions for liquidity issues at the Company over various horizons,” to be accomplished by, among other things, a $750 million revolver provided by Access — which would ultimately become the Access Revolver. (Id. at .002, .007.) Project Aquifer considered how the Access Revolver and Marimba 16 could be used “to our advantage in negotiations with banks,” including “[sjecurities [djemand,” “[a]ddi-tional liquidity,” and “[ljooser maintenance covenants.” (Id. at .002.) The presentation also discussed “Setting up Management penalties to assure rapid repayment of Access Revolver.” (Id. at .008.)
Oh March 14, 2008, Access prepared a second presentation, entitled “Aquifer— the Dream Scenario.” (PX-476 (Aquifer— The Dream Scenario Presentation, dated 3/14/08 (“Aquifer Dream Scenario”)).) The Aquifer Dream Scenario presentation discussed whether subsequent lenders would “insist that Access not be repaid prior to their being repaid” and “[sjetting up LBI priorities to assure rapid repayment of the Access Revolver.” (PX-476 (Aquifer Dream Scenario) at .0013; compare with PX-471 (Project Aquifer) at .008 (“Setting up Management penalties to assure rapid repayment of Access Revolver”).)
b) LBI and Access Enter into the Access Revolver
On March 27, 2008, AIH, as Lender, entered into the Access Revolving Credit Agreement with Lyondell, as U.S. Borrower, and Basell Finance, as Foreign Borrower (together with Lyondell, the “Borrowers”). (JX-51 (Access Revolving Credit Agreement).) LBI was also a party to the Access Revolving Credit Agreement. (Id.) *85 Pursuant to the Access Revolving Credit Agreement, AIH established a $750 million unsecured revolving line of credit: the Access Revolver. (Id.)
Because the Access Revolver was unsecured, it was more costly than the 2007 Revolver and the ABL Facilities. (Twitchell Decl. ¶ 74.) This facility was something that “the company had requested ... of the shareholder as one more liquidity tool,” and was reviewed by the Supervisory Board of LBI as “an additional financing source being made available to the company from the shareholder.” (Potter Dep. Tr. at 200; see Bigman Decl. ¶ 112.) Although the Access Revolver was not drawn upon until October 2008, Twitchell testified that it was an important component of LBPs liquidity. (Twitchell Decl. ¶ 75.)
Under the terms of the Access Revolving Credit Agreement, LBI could draw upon the Access Revolver on one day’s notice to AIH. (JX-51 (Access Revolving Credit Agreement) § 2.02(a).) The following day, AIH was to make the requested funds available to the requesting party through wire fund transfer. (Id. § 2.02(b).) While the repayment of all outstanding borrowing was required on the maturity date, September 28, 2009, prior to that time, debts could be voluntarily repaid upon one day’s notice from the borrower to AIH. (Id. §§ 1.01, 2.06, 204(a).) Section 5.18 of the Access Revolving Credit Agreement required LBI to represent and warrant that it was solvent as of the Access Revolver’s closing date, on March 27, 2008. (Id. § 5.18 (“On the Closing Date, the Loan Parties and their Subsidiaries (taken as a whole) after giving effect to the transaction contemplated by this Agreement and the payment of the fees and expenses in connection therewith, are Solvent.”).) But LBI did not have to represent and warrant that it was solvent when it made loan draws on the Access Revolver.
The Access Revolving Credit Agreement contained the following “Material Adverse Effect” (also known as a “Material Adverse Change” or “MAC”) clause: “Since the Closing Date, there has been no event or circumstance that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.” (Id § 5.05(c).) The term “Material Adverse Effect” was defined to include, among other things, “a material adverse effect on the business, operations, assets, liabilities (actual or contingent) or financial condition of the Company.” (Id § 1.01, p. 22.)
The absence of a solvency requirement raises the issue whether LBI’s deteriorating financial condition in late 2008 supported Access’s assertion of the MAC clause in refusing to fund LBPs requested $750 million loan draw on December 30, 2008, just eight days before LBI filed its chapter 11 cases.
c) LBI Nearly Draws on the Access Revolver in April 2008
On April 10, 2008, Twitchell and Storey informed Benet and Bigman that Lyondell would likely need to draw on the Access Revolver. (PX-527 (E-mail from Storey to Benet and Bigman, re: LyondellBasell Potential Cash Requirement, dated 4/10/2008) at .003-004.) In response to Benet and Patel, Kassin remarked, “Does Len know about this? As a Board Member and in my other roles, I feel a tad misled (that is not a legal term).” (PX-528 (E-mail from Kassin to Benet and Patel, re: LyondellBasell Potential Cash Requirement, dated 4/10/2008).)
Ultimately, the anticipated April draw on the Access Revolver never occurred. (Twitchell Decl. ¶ 81.)
*86 d)LBI Upsizes its European AR Facility and ABL Facilities in April 2008
On or about April 14, 2008, LBI obtained an amendment to its European Accounts Receivable Securitization Program which added about $150 million of availability. (Twitchell Decl. ¶ 81.) On April 80, 2008, the size of the ABL Facility was increased by $600 million, consistent with the Accordion feature. (Twitchell Decl. ¶¶ 81-82.)
e)LBI Draws on and Repays the Access Revolver in October 2008
Several unforeseen events in 2008 diminished LBI’s available liquidity. These events included a planned turnaround at the Houston refinery that was significantly prolonged by a serious crane accident that resulted in fatalities, two hurricanes that caused LBI’s Gulf Coast chemical plants to be shut down for most of September, and the ripple effects of the early stages of the financial crisis which ultimately triggered the Great Recession, including having more than $175 million in cash frozen when a money market fund “broke the buck” due to the Lehman Brothers bankruptcy. (Twitched Decl. ¶¶ 86-89, 94-95.) Accordingly, cash inflows and availabdity were weaker than expected in early October 2008, and this became a challenge as LBI prepared to make its payments due on the 15th of the month. (Id. ¶ 90.)
On October 15, 2008, LBI drew $300 million on the Access Revolver (the “October Draw”). (Twitched Decl. ¶ 91; Bigman Decl. ¶ 118; JX-63.) At the time of the October Draw, LBI had virtually no other available sources of liquidity. (10/25 Trial Tr. (Twitched) 1672-73, 1676-79 (explaining DX-416, a short-term cash forecast).) LBI’s CEO Volker Trautz described this lack of liquidity as a “short-term” issue resulting from “a mismatch in timing with funds coming in and going out.” (Trautz Dep. ¶ 134; see also Twitched Decl. ¶¶ 90-91.) The October Draw was expected to be repaid in a matter of days. (Storey Decl. ¶ 14; DX-570; DX-572.)
The October Draw was repaid in three $100 million installments on October 16, 17, and 20, 2008 (the “October Repayment”). The Trustee is seeking to recover the $300 million October Repayment as an avoidable preference and constructive fraudulent transfer. Trautz testified that LBI repaid the October Draw “when [LBI] didn’t need it anymore.” (Trautz Dep. 134; Twitched Decl. ¶ 91.) The October Repayment was made from LBI’s ordinary cash flow, not from other loans. (11/4 Trial Tr. (Reiss) at 2936:17-20 (“So as soon as liquidity in October came in, the very next day, it made sense to reduce the cost of borrowing, so you would repay the most expensive borrowing first, having two different revolvers.”).)
f)LBI Attempts to Draw on the Access Revolver in December 2008 but AI International Refuses the Request
It is undisputed that the global economic collapse of fad 2008 had a serious negative impact on LBI’s business. (See supra, Section IV.K.1.) Against this backdrop, on December 30, 2008, LBI made a draw request for the full amount of the Access Revolver: $750 million. (Twitched Decl. ¶ 98; JX-71.) The request went to AI International, which had been assigned the Access Revolver. (JX-71.) At that time, LBI also was in “discussions with its lenders concerning an anticipated bankruptcy filing.” (Trautz Dep. Tr. at 138.) Aware that “restructuring advisors had been retained and were hard at work” and “be-liev[ing] there had been a material adverse change by that time,” AI International declined to fund the requested draw on December 31, 2008. (Benet Decl. ¶ 36; JX-72.) The Trustee claims that this refusal to *87 fund the $750 million draw request breached the terms of the Access Revolving Credit Agreement.
L. The Banks’ Projections
The Trustee’s constructive fraudulent transfer claims and preference claim all hinge on this Court making findings of insolvency: of LBI on December 20, 2007, and of LBI or Lyondell on October 16, 17, and 20, 2008. As explained in the legal analysis below (see infra Section V.A), three alternative insolvency tests apply to the constructive fraudulent transfer claim regarding December 20, 2007, but only a balance-sheet insolvency test applies to the preference claim regarding October 16,17, and 20, 2008. The allegedly manipulated refreshed projections were the central focus of the Trustee’s insolvency argument at December 20, 2007. But Lyondell’s projections are not the only ones that need to be considered in determining whether LBI or Lyondell were insolvent. In addition to the Lyondell management projections (discussed below), the Court has another source of projections to consider: those of the Banks that financed the Merger.
On July 16, 2007, Goldman Sachs, Merrill Lynch, and Citibank agreed to provide roughly $21 billion to finance the Merger. On August 8, 2007, ABN AMRO joined the joint lead arranger group, and each of the four banks shared underwriting responsibilities equally. On October 29, 2007, UBS also became a lead arranger, leaving each of the now five joint lead arrangers equally responsible for the $21 billion principal amount of the Merger financing. Notably, and as discussed further below, UBS agreed to join the joint lead arranger group after Lyondell indicated that it would likely miss its third and fourth quarter earnings targets, and after a large team of UBS analysts reviewed the Merger and the relevant projections. (See DX-171 (September 2007 report from Lyondell indicating that it would miss its EBITDA projections for the third and fourth quarters); (DX-202 (UBS “Finance Commitment Committee Memorandum” dated October 2007); see also Benet Decl. ¶ 25.) Further, after UBS joined the lead arranger group, the Banks increased the unused availability under the financing agreement to roughly $2 billion, and funded an additional $550 million for the acquisition of the Berre refinery.
Each of the Banks committed substantial capital to the transaction, and risked billions of dollars on the deal. Naturally, each of the Banks conducted a detailed review of the transaction, and in addition to analyzing the projections set forth by Lyondell management, each Bank prepared projections of its own. Each Bank prepared “base cases,” consisting of projections intended to reflect a best-guess on the likely outcome of the merger, in addition to “downside cases” or “credit stress cases,” consisting of projections intended to stress LBI in a “worst case” or “doom and gloom” scenario. (See, e.g., Jeffries Decl. ¶ 24 (“The Downside Case was not designed to be a realistic assessment of conditions LBI was likely to face. To the contrary, the stress conditions reflected in the Downside Case were considered highly unlikely to occur. That said, even under the Downside Case, Citi projected that LBI would remain solvent, adequately capitalized and able to pay its debts as they came due.”); Vaske Decl. ¶ 30 (“We created the downside case to satisfy ourselves that even under stressed conditions the combined company would be creditworthy, adequately capitalized and able to repay our loans. The stressed conditions used to generate the downside case did not represent what we thought was a likely set of circumstances, but instead, a set of what we believed were improbably adverse circumstances that were assumed in order to *88 test the ability of the combined company to sustain a series of hypothetical, severely negative conditions.”)-)
a) The Bank’s Diligence Process
The Banks were given an opportunity, albeit an abbreviated one, to conduct due diligence on the proposed Merger at a share price of $48. Initially, Goldman Sachs, Merrill Lynch, and Citibank conducted an intensive diligence on the Merger that took place on an expedited basis over the course of several days as a result of Blavatnik’s insistence that the deal' get signed by July 16, 2007. (See, e.g., 10/31 Trial Tr. (Kassin) at 1804; PX-210.) This diligence project culminated in a weekend of meetings, with Lyondell’s management, Access, Basell, and the original three lending banks on July 14 and 15,2007. (Jeffries Decl. ¶¶ 17-31; Frangenberg Decl. ¶¶ 21, 27, 30-32, 54-68; Vaske Decl. ¶¶ 6-15; Benet Decl. ¶ 16; Bigman Decl. ¶¶ 53, 76, 124.)
While this diligence review took place over several days, Access,' Basell and several of the banks were already closely familiar with publicly available information relating to Lyondell’s business and financial condition as a result of watchfully monitoring Lyondell over the previous months and years. (Jeffries Deck ¶¶ 7-16; Blavatnik 2009 Deck ¶ 12; Kassin Deck ¶59.) The bank representatives testified that this brief time period was sufficient to analyze the transaction, in part because of their ongoing familiarity with the companies involved, and that the diligence period was not unusual for public transactions of this nature. (Jeffries Deck ¶¶ 6-7, 17-31; Vaske Deck ¶¶ 14-15.)
Lyondell management presented EBIT-DA projections (the “Management Projections”) during these diligence meetings, and the projections were viewed as “optimistic” and higher than Access and Ba-sell’s estimates, but ultimately not unreasonable. It is hardly surprising that the seller puts an optimistic face on what it is selling. Access and the Banks were hardly babes in the woods in analyzing complex transactions, and reaching their own conclusions whether the proposed transaction made economic and business sense.
Each of the original joint lead arrangers worked diligently in preparing its own base and downside case projections, and presenting memorandums to the requisite committees or executive groups at then-respective banks, whose approvals were required before each bank could commit to provide merger financing. Each of the three original lending banks agreed to the Merger financing commitment. (PX-483.)
Citibank, for example, had up to 50 or more employees working to analyze and evaluate data in connection with the Merger. (Jeffries Deck ¶ 18.) Citibank used its internal data and prior relationship with Basell to update a previously prepared model with Lyondell’s internal and nonpublic information to arrive at a complete financial forecast for the combined company. (Id. ¶¶ 19-21.) Ultimately, the “Credit Committee” at Citibank was provided with a 74-page approval memorandum and unanimously approved Citibank’s participation in the Merger. (Id. ¶ 29.) The approval memorandum detailed risks, such as industry cyclicality and rising raw material prices, but also noted the competitive advantage that LBI would have in the market, and outlined the base and downside cases prepared by Citibank that reflected a positive outlook on the Merger. (Id. ¶¶ 26-27.)
Likewise, Goldman Sachs was already familiar with Basell from prior dealings, and had a vast institutional knowledge base about both the petrochemical and refining industries. (Vaske Deck ¶¶7-10.) John Vaske of Goldman Sachs testified that the compressed timeline of the trans *89 action was “not unusual” and Goldman Sachs “employed the standard, rigorous process that [it] typically employ[s] before committing the firm’s capital.” {Id. ¶ 14.) Vaske stated that based on the diligence performed, he was satisfied that the proposed capital commitment was appropriate, and recommended that Goldman Sachs participate in the merger (and not surprisingly, indicated that had he not believed that there was sufficient time or information available to assess the deal, he would not have recommended that Goldman Sachs participate), {Id. ¶ 15.)
As noted above, ABN AMRO joined Goldman, Merrill, and Citibank as lead arrangers in August 2007. Then in October, after Lyondell indicated that it would miss its third and fourth quarter EBITDA targets due to wildly volatile oil prices and negative petrochemical demand growth, UBS committed to the deal. UBS conducted diligence, prepared its own projections, and ultimately decided to commit funds to the Merger. UBS was presented with a new set of management projections that, in conjunction with UBS’s own base and downside cases, presented to UBS management in a. credit memorandum, led UBS to believe that the deal was prudent. (DX-311 at .035.) Notably, even with updated company performance data, UBS’s base case indicated that LBI would not only maintain a healthy liquidity position, but also pay down a sizeable portion of debt. {Id. (UBS’s April 2008 credit memorandum indicating that under UBS’s base case, LBI would have “[sjtrong liquidity throughout [the] projection period,” with “25.8% of first lien debt and 15.6% of total debt paid down by 2011”).)
b) The Banks’ Projections
In determining whether to participate in the Merger financing, each of the Banks prepared both base case and downside case projections. As explained by Jeffries of Citibank, the “base case” “reflected Citi’s own view, based on its due diligence and knowledge of the industry, as to the most accurate forecast of the company’s future performance. The [Citi] Base Case represented a more conservative view than the [Lyondell] Management Case, which reflected the projections of Basell and Lyondell Management.” (Jeffries Deck ¶ 23.)
On the other hand, the “Downside Case was a stress test developed by Citi to determine how the merged company would perform under severe economic conditions, including conditions that would result in the breakage of financial covenants.” (Jef-fries Deck ¶ 24.) By adjusting certain assumptions, the Citi Downside Case decreased projected annual EBITDA by roughly 45%. {Id.) The downside ease, however, “was not designed to be a realistic assessment of conditions LBI was likely to face. On the contrary, the stress conditions ... were considered highly unlikely to occur.” {Id.)
The following chart, discussed in more detail below, shows 36 sets of projections prepared by the Banks and Lyondell management in connection with the Merger. (CX-1.)
*90 [[Image here]]
c) The Merrill Lynch Model
As noted above, from April 2006 through the closing of the Merger, Frangenberg was a member of the Chemicals Group at Merrill Lynch and prepared projections models for the Merger. (Frangenberg Decl. ¶¶ 1-2, 4.) Frangenberg testified at trial regarding several models prepared by Merrill Lynch in connection with the Merger, but on cross-examination, admitted that the models included several significant errors. Using Merrill Lynch’s model, Frangenberg ran, based on assumptions provided to him by Access, different “cases” purporting to test the future financial performance of a combined Lyondell-Basell entity: a “base case,” a “management case,” a “downside case,” a “credit stress test,” and a “worst case scenario.” (11/1 Trial Tr. (Frangenberg) at 2057:9-58:4; DX-56 (ML Supplemental Hugo Analysis, 4/1/07 (“worst case scenario”)); DX-66 (ML Credit Stress Test, 4/10/2007) at .015.)
Importantly, Frangenberg did not run the “worst case” scenario on the final deal terms, but Frangenberg admitted that the model he created could test multiple cases and assumptions at one time, including at $48 per share. (11/1 Trial Tr. (Frangen-berg) at 2161:5-62:2, 2121:14-22:4.) Thus, Frangenberg had the ability to run the “worst case” scenario on the revised deal terms, but did not. Under this “worst case scenario” model, LBI was shown to lower its total debt load by $4 billion over a number of years, but on cross-examination, Frangenberg admitted that LBI’s actual post-merger debt load was significantly higher than the $20 billion assumed under the “worst case scenario.” (See 11/1 Trial Tr. (Frangenberg) at 2091:3-18.) Similarly, under Merrill Lynch’s “credit stress test,” also not run on final deal terms, Frangen-berg contemplated that LBI would reduce its debt load significantly, but again, the actual ultimate debt left on LBI following the Merger was several billion dollars higher than contemplated by Frangen-berg1s model. (Id. at 2098:23-99:6.)
And more generally, the Merrill Lynch model overstated ethylene revenues of Lyondell by failing to take a discount off of the contract price of ethylene, which had a substantially inflated effect on Lyondell’s *91 revenues. 17 And, Merrill Lynch did not account for the millions of dollars that were to be used for the Berre acquisition. (Id. at 2099:7-10.)
Confronted with these inconsistencies and errors, along with other accounting defects in the calculation of product margins, Frangenberg was forced to admit that the Merrill Lynch models were potentially off by billions of dollars. (Id. at 2150:12-18 (referencing “double counting” in connection with modeling projections for ethylene co-product margins that would result in defects, Frangenberg is asked “So across the span of this model, you’re probably talking billions of dollars, right?” and answers “Yes.”) If the Merrill Lynch models were the only projections other than Lyondell’s, the Trustee’s arguments would have greater force. But the other Banks did their own modelling, not subject to the same challenges the Trustee waged against the Merrill Lynch model.
M. Expert Testimony Regarding Lyondell’s and CMAI’s Projections
This Court’s solvency determinations, in part, turn on the extent to which Lyondell management’s projections may properly be relied upon. Lyondell produced the refreshed projections in May 2007, but also prepared projections later on in connection with the Merger. Both the Trustee, through its industry experts CMAI and Purvin & Gurtz (“PGI”), and the Defendants, through their industry experts Young and O’Connor, offered opinions regarding the credibility and value of the various projections prepared by Lyondell, and in certain circumstances prepared independent contemporaneous projections. 18 Each will be discussed in turn.
1. CMAI
The Court has carefully considered the testimony of CMAI, along with the testimony of the Trustee’s other experts who rely on CMAI’s CIMBal Model (defined below). The Court finds that CMAI’s testimony at trial was not credible for the reasons explained below.
a) CMAI’s Changing Roles and Opinions Over Time
CMAI and Turner Mason were retained by Basell in 2007, prior to the close of the Merger, as independent consultants to review the reasonableness of projections used in connection with the Merger. (See Frangenberg Decl. ¶¶ 74-84.) CMAI was a leading petrochemicals forecasting provider to the industry, whose petrochemical forecasting resources were extensively used by both Basell and Lyondell at the time of and preceding the Merger. Later, after the bankruptcy eases were filed in 2009, CMAI and PGI prepared a model (the “CIMBal Model”) to value and understand LBI’s business from the standpoint of 2009 on behalf of the Official Committee of Unsecured Creditors (the “Creditors’ Committee”). Still later, CMAI and PGI converted their model to use in this litigation on behalf of the Trustee. (10/19 Trial Tr. (Witte) at 595:22-97:18, 604:23-05:8.) CMAI’s opinions changed with each of these engagements, as it represented dif *92 ferent parties at different stages — pre-merger for the Banks, post-bankruptcy for the Creditors’ Committee, and during trial for the Trustee. As a result of these ever-shifting conclusions, CMAI’s credibility was seriously compromised at trial,
b) CMAI’s Pre-Merger Work Concludes that Lyondell Management Projections Were “Conservative”
CMAI’s pre-merger work for Basell was conducted in November 2007, under the supervision of CMAI employee Arvind Ag-garwal. (Aggarwall Dep. Tr. at 56:2-18.) For its pre-merger work, CMAI drew upon transaction databases, and utilized its own forecasts of cash margins for petrochemical products, 19 to arrive at average cash margins for a range of products. (CMAI 2009 Report, PX-804 at 17.) To project future cash margins, CMAI used macroeconomic demand forecasts for different products and regions, and compared this data with forecasts for manufacturing capacity to obtain forecast operating rates. 20 Generally speaking, cash margins tend to increase along with operating rates as manufacturing plants approach capacity.
CMAI’s November 2007 analysis on behalf of Basell indicated that the differences between its own projections and management’s projections for the petrochemical side of the business were insignificant, and highlighted that the “Lyondell view is conservative relative to CMAI.” (JX-24 at .219; see also Frangenberg Deck ¶ 84.) The November 2007 CMAI report was “a fulsome analysis of the reasonableness of the contemporaneous projections and other business assumptions regarding the 2007 merger of Basell and Lyondell.” (Gal-logly Decl. ¶ 25.) Turner Mason, a refining consultant also relied upon by the Trustee at trial (10/20 Trial Tr. (Nebeker) at 733-34), concluded that the projections for Lyondell’s refining business were “based on reasonable operating assumptions” and that, while management’s forecast was “more bullish” than Turner Mason’s, it was “not significantly so.” (JX-23 at .055-56.) Based on the work of CMAI and Turner Mason before the Merger, the bank group developed a “consultants’ sensitivity case” that was consistent with, and further supported the reasonableness of, management’s business plan. (Bigman Deck ¶ 62; Frangenberg Deck ¶ 83; DX-219 at .019; Kassin Deck ¶ 79.)
c) CMAI’s Litigation Work Concludes that Lyondell Management’s Projections Were Materially Overstated
When CMAI was later retained for this litigation, the Trustee’s industry experts, Witte and Nebeker, did not evaluate management’s EBITDA projections against contemporaneous (2007) industry out looks — including those by their own firms, CMAI and PGI. Instead, over a period of eight months in 2009, they developed a model that attempted to model LBI’s assets from the bottom up. For petrochemicals, Witte used multiple proprietary CMAI databases — to which Defendants received only limited access — to calculate operating rate and price forecasts for the various products and regions in LBI’s portfolio. These inputs were then hard-coded into another proprietary CMAI database called CIMBal, which was also used to calculate the cash costs variable of the EBITDA equation. (10/19 Trial Tr. (Witte) at 484, 493-95.)
CMAI populated CIMBal with company-specific Lyondell and Basell operating per *93 formance data and historical pricing data, including some non-public information it did not previously have access to prior to LBI’s bankruptcy. (CMAI 2009 Report, PX-804 at 13; 10/19 Trial Tr. (Witte) at 615:4-22.) It was configured to LBI’s 2007 operational viewpoint, and then populated with CMAI and PGI’s price forecasts that were available in 2007. (Id,) CMAI attempted to model the expected profitability of each of LBI’s petrochemical groups based on the information available to LBI at the time and the prevailing industry outlook at the time. (Id.) Through the CIMBal Model, CMAI sought to determine, in late 2009, the cost of production for LBI’s various petrochemical divisions, as well as the actual prices that it received for those products prior to a management presentation given in October 2007 (the “October 2007 CIM,” JX-19).
The CIMBal Model asserted that the projections of Lyondell’s EC&D division and Basell’s PO Europe division in the October 2007 CIM were materially overstated. (See CMAI 2009 Report, PX-804 at 26, 86.) According to the CIMBal Model, Lyondell’s EC&D projections were overstated by a total of $900 million between 2008 and 2011 due to margin assumptions that were purportedly inconsistent -with the margins achievable by Lyondell’s operating assets. (Id at 34-36.) The outputs from the CIMBal Model also imply that Basell PO Europe’s projections were overstated by a total of $1,5 billion, due to volume and margin disparities between the CIMBal Model and the LBI projections, with approximately $500 million being due to the overstated volume and approximately $1 billion being due to the overstated margins. (Id. at 22-26.) Based this modeling, CMAI asserts that Basell improperly projected its PO Europe operating rate would increase to levels it had never historically reached. (Id. at 23 (graphs showing Western Europe operating rates projected to spike in LBI projections).)
The relevant EBITDA projections from the CIMBal Model are summarized in the table below:
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d) CMAI’s Financial Experts Relied on the CIMBal Model
The Trustee’s financial experts, Maxwell and Tuliano, readily admitted they are not petrochemical or refining experts (10/24 Trial Tr. (Maxwell) at 1442; 10/17 Trial Tr. (Tuliano) at 159-60), and both relied on CMAI in selecting the projections that they used for their financial analyses. Maxwell, in fact, based his analysis on the CIMBal model, and selected which additional projections to use based on CMAI’s opinions. (10/24 Trial Tr. (Maxwell) at 1409-11.) Tuliano did not use the CIMBal projections, but relied on CMAI in select *94 ing the projections he used. (10/17 Trial Tr. (Tuliano) at 161.)
This reliance raises serious questions as to the credibility of Tuliano’s and Maxwell’s reports. (10/31 Trial Tr. (Maxwell) at 1700-01, 1734-35.) But as a preliminary matter, the Court is struck that the Trustee retained CMAI — and CMAI agreed to be retained — for an engagement that, by its very nature, required CMAI to undermine or repudiate its November 2007 report. CMAI and the Trustee’s counsel presented Witte as its Rule 30(b)(6) witness to testify regarding the November 2007 report, which he had no role in preparing. Aggarwal, the actual author of the 2007 report, was ultimately deposed, but CMAI and the Trustee’s counsel supplied Aggar-wal with Witte’s expert reports and deposition testimony. (Aggarwal Dep. Tr. at 56-59.) The Court questions whether the provision of these materials, which were critical of the November 2007 report, may have influenced Aggarwal’s subsequent testimony. Nevertheless, even without delving into the issue whether Witte or Aggarwal was the appropriate deponent, CMAI’s changing conclusions over time have severely undermined its credibility in this litigation.
e) Defendants’ Critique of CIMBal
Defendants’ refining and petrochemical expert Young strongly — and, the Court finds, credibly — criticized CIMBal. Young acknowledged that when the Defendants ran the data CMAI populated CIMBal with through their own model, the results were not “thematically lower than we would have expected.” (11/4 Trial Tr. (Young) at 827:21-828:10.) The Defendants nevertheless attempted to reproduce one segment of the LBI portfolio using CIM-Bal. (11/4 Trial Tr. (Young) at 833:21-35:5 (Young tested a “slice of the portfolio”).) It is this attempted reproduction upon which Young bases his critique.
Young and the Defendants argued at trial that the fundamental lack of transparency and the inability to comprehensively reproduce the modeling done by CMAI through CIMBal raises serious questions about CMAI’s conclusions. Young explained that after spending “several hundreds of hours” with his team of experienced analysts examining CMAI’s model, he determined that “[t]he capability to audit the model and follow numbers back to the source ... was just missing completely.” (11/4 Trial Tr. (Young) at 2873.) Young and his team were given access to the CIMBal Model on a laptop in a setting supervised by a CMAI employee with knowledge of CIMBal, but Young and his team were nonetheless unable to fully audit the model and test the assumptions and inputs, or reproduce any CIMBal modeling in a meaningful way. 21 Numerous inputs and assumptions were hard-coded into the CIMBal Model, prompting Defendants to dub the CIMBal Model a “black box.”
Even more significantly, Witte’s projections developed using the CIMBal Model in 2009 for litigation purposes were fundamentally at odds with the projections that *95 CMAI developed in 2007 on behalf of Ba-sell, and which were relied on by the Banks in committing billions of dollars in Merger financing. (See DX-196; DX-215.) In particular, as set out in CMAI’s November 2007 “Project Hugo” presentation to certain financing banks, CMAI concluded that “the Basell technology does allow Ba-sell to achieve above average spreads in the market, compared to CMAI,” and Lyondell management’s view was “conservative relative to CMAI.” (JX-24 at .205, .219.) But for the purposes of this litigation, CMAI’s experts testified that Lyon-dell management’s projections were materially overstated by approximately a total of $2.4 billion. (CMAI 2009 Report, PX-804 at 26, 36.)
The Trustee’s experts conceded that no industry participant (including CMAI and PGI) had predicted the extraordinary adverse events that caused the deterioration in LBI’s business performance in 2008— among them the wild upswing and downswing in oil prices, and the unprecedented plummeting in demand for both petrochemicals and refined products. Despite these unprecedented events, the EBITDA projections in CMAI and PGI’s model almost exactly matched LBI’s actual 2008 performance. (10/19 Trial Tr. (Witte) at 576 (“Q. Despite the fact that 2008 unexpectedly brought us ... the first global demand drop for petrochemical products in your career, ... your model is set to predict the same earnings that the company actually got, right? A. Yes, in total.”).) Witte acknowledged the model was calibrated against LBI’s 2008 actuals. (Id. at 577 (“We checked the output of the model ... against 2008 actuals.”).) Notably, once oil prices stabilized and demand recovered following the financial crisis, the CIMBal Model dramatically under-predicted LBI’s actual EBITDA — including by nearly $3 billion in 2011 alone. (Compare CMAI 2009 Report, PX-804 at 7 (CMAI/PGI projecting 2010 and 2011 LBI EBITDA of $2.79 and $2.66 billion, respectively), with DX-489 at .003 and DX-713 at .001 (reflecting actual 2010 and 2011 LBI EBITDA of $4.04 and $5.59 billion, respectively).) The CIMBal Model’s nearly perfect calibration to actual 2008 results— despite the fact that it was intended to reflect the perspective of 2007, before the Great Recession — smacks of hindsight.
The Court agrees with Defendants’ argument that the CMAI projections are rendered even more unreliable because: (i) CMAI’s severe conflict of interest and its actions in connection with the deposition of Aggarwal undermine CMAI’s credibility; and (ii) CMAI’s model was essentially a “black box,” which neither Defendants nor the Court had an effective opportunity to access or evaluate. See Lawrence v. Raymond Corp., No. 3:09 CV 1067, 2011 WL 3418324 , at *7 (N.D. Ohio Aug. 4, 2011), aff'd, 501 Fed.Appx. 515 (6th Cir. 2012) (“An expert is not a black box into which data is fed at one end and from which an answer emerges at the other; the Court must be able to see the mechanisms in order to determine if they are reliable and helpful.”). Courts must always view the opinion of litigation experts with searching scrutiny, but when those very same experts represented other parties at earlier stages and then dramatically change their opinions for litigation purposes, it tests credibility to accept the litigation opinions.
2. Defendants’ Expert Testimony
a) Young
In addition to assessing the CIMBal model, Defendants’ expert Young evaluated the assumptions underlying LBI’s petrochemicals and refining projections as of December 20, 2007, and determined that they were reasonable. (11/4 Trial Tr. (Young) at 2830-31.) Young also determined that the refreshed projections them *96 selves, and the process by which they were prepared, was reasonable in the circumstances.
Specifically, he compared management’s assumptions for the key EBITDA drivers — including operating rates and margins for petrochemicals, and the crack spread for refining — to contemporaneous industry forecasts in 2007, and concluded (as CMAI did in its analysis in 2007) that management’s projections were consistent with the industry view. (Young 2009 Report, DX-804 at 32.) Young presented un-rebutted analysis showing the consensus outlook in 2007 that demand growth for petrochemicals and refined products would remain positive and robust (id. at 16-18, 21-22), and that the projected upcoming petrochemical trough would be “mild” and “entirely supply-driven.” (Id. at 15,18; see also DX-217 at .164 (CMAI report from November 2007 projecting that “margins at the end of the decade [will be] somewhat above the last trough in 2001/02”).) Likewise, Young explained that the confluence of events that actually caused LBI to miss its 2008 projections — including rapidly rising and then plummeting oil prices (which squeezed petrochemical margins and then wiped out refining margins) and unprecedented negative demand growth for petrochemicals in the fourth quarter of 2008 — were not, and could not reasonably have been anticipated as of the Merger Closing Date. (Young 2009 Report, DX-804 at 58-69.) Young’s views, in this respect, are not significantly different from the views expressed by CMAI in a 2009 industry report that addressed the effect of the Great Recession on LBI. See DX-468 at .010 (CMAI report from April 2009 acknowledging that it was “the worst global recession since World War II” and “[t]he combination of plunging chemical sales and global credit freeze [that] rendered LyondellBasell unable to service its ... debt”).)
As noted above, Young also opined that the rationale, process and the results of Lyondell’s refreshed projections were reasonable under the circumstances. (Young 2011 Supplemental Report, DX-806 at 13-14.) With respect to petrochemicals, he explained that Lyondell management’s downward revision for 2007 and 2008 was sensible in light of the delay in passing on higher-than-expected feedstock prices to customers, but that improving supply and demand fundamentals due to delays in new Middle East capacity 22 and other factors provided ample business justification for management’s improved outlook for 2009-2011. (Id. at 15-16; see also DX-554 at .037 (CMAI power-point presentation for an annual chemicals symposium, stating CMAI’s December 2007 view that “[n]ew capacity somewhat delayed”).) With respect to refining, Young opined that the upward adjustments in the refresh were reasonable in light of Lyondell’s substantially better-than-projected 2007 performance, the limited impact of rising oil prices on demand, and the continued optimization of Lyondell’s (now solely-owned) Houston Refinery through capital improvements and cost reduction programs. (Young 2011 Supplemental Report, DX-806 at 19; 11/4 Trial Tr. (Young) at 2849.)
With respect to the refresh process itself, Young testified regarding different types of corporate planning that are utilized by companies in different scenarios, and sought to contextualize the refresh process employed by Lyondell when revising its projections in May 2007. (Young 2011 Supplemental Report, DX-806 at 8- *97 22.) Young identified three categories of corporate planning: long range planning, short term planning, and event driven planning. Young noted that Lyondell’s LRP was obviously a form of long range planning, as it involved a detailed and thorough process that encompassed strategic considerations, entailed a “bottoms-up” review, macroeconomic analysis and industry trends. (Id. at 10.)
As noted above, the refresh process began following Blavatnik’s acquisition of the Toehold Position, and Access’s filing of the 13D with the Securities and Exchange Commission on May 11, 2007. Accordingly, Young determined that the refresh process represents a typical “event driven” planning that came in response to a potential merger opportunity, and required swift execution. (Id. at 13-14.) Salvin, Young explains, was “the kind of professional whom [he] would expect to see coordinate such an activity, due to his over thirty years of experience at Lyondell and knowledge of Lyondell’s diverse businesses.” (Id. at 14.) The actions of Salvin, and senior planning staff and management, in updating EBIT-DA projections in connection with a potential merger opportunity were reasonable and appropriate given the circumstances, according to Young.
Young also determined that the refreshed projections themselves were reasonable. (Id. at 14-22.) In the context of “gathering optimism in the performance of the Houston Refinery” and the anticipated poor performance in the chemical space, Young analyzed each business segment’s historical performance and industry outlook, and concluded that the alterations to the EBITDA projections “were based on identifiable and justifiable business factors.” (Id. at 20.) Young points out that for the first half of 2008, LBI’s performance actually did track the refreshed forecast rather well. (Id.) The Court finds Young’s testimony to be credible and persuasive. The Trustee’s challenge to the refreshed projections presented a good headline for the Trustée’s theory of the case. But credible trial evidence did not support that headline.
b) O’Connor
Defendants’ expert Thomas O’Connor, an expert in the oil refining industry, evaluated the outputs of the refreshed refinery projections, and also evaluated the October 2007 CIM projections for the Houston Refinery and concluded that they were reasonable. (11/3 Trial Tr. (O’Connor) at 2529-31.) O’Connor submitted three expert reports: (i) an expert report dated November 7, 2009 (DX-800), (ii) a rebuttal expert report dated November 20, 2009 (DX-801), and (iii) a supplemental expert report, dated April 15, 2011 (DX-803).
O’Connor’s opinion regarding the October 2007 CIM was based on his evaluation of the competitive advantages of the refinery in 2007, including its ability to process a high percentage of very cheap “heavy” or “sour” Venezuelan crude oil (id. at 2532-33), the long-term contract that ensured a steady supply of this cheap crude (id. at 2536), and the refinery’s ability to produce premium products such as ultra-low sulfur diesel before a number of other refiners had that capability (id. at 2535). O’Connor further evaluated Lyondell forecasts for market indicators underlying the Houston refinery projections in the October 2007 CIM. This included the forecast for the spread between the prices of light crude oil and heavy crude oil, which was in line with contemporaneous industry projections including those of PGI. (Id. at 2541-42.) According to O’Connor, the Lyondell forecast for the spread between heavy crude prices and the price of refined products was similarly supported by Lyon-dell management’s views of refining capacity additions (id. at 2552-55), projected *98 global growth in demand for refined products which was expected to continue (id. at 2556), the contemporaneous behavior of other refining companies (id. at 2563-64), and data from the Energy Information Administration (id. at 2566).
Though O’Connor did not opine about the process by which Lyondell refreshed its projections in May 2007, O’Copnor did “independently analyze the output” of the refreshed projections in concluding that the projections were reasonable. (11/3 Trial Tr. (O’Connor) at 2530-31.) This included evaluating various factors in the first half of 2007 which supported an increased projection for the Houston refinery, such as delays in capacity additions in the industry (id. at 2570), a shift in the rpfinery’s product slate to produce a higher percentage of premium products (id. at 2573), a positive impact from planned and completed capital improvement projects (id. at 2574), and a reasonable expectation for higher spreads between the price of heavy crude oil and refined products in 2008. (Id. at 2574-75). The Court finds O’Connor’s testimony to be credible, and supported by evidence.
N. Expert Testimony Regarding Solvency
A number of financial and solvency experts testified at trial as to LBI’s financial condition on several key dates. As discus

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8500456. Public record. Not legal advice.