LyondellBasell units file for bankruptcy

January 6, 2009 9:45:51 PM PST
The U.S. arm of chemical giant LyondellBasell Industries has filed for bankruptcy as the recession continues to weaken demand for its products, which are used in everything from cars to detergents. [SIGN UP: Get headlines and breaking news sent to you]

The Houston-based company said Tuesday that it had arranged for up to $8 billion in financing to keep operating while it reorganizes.

Lyondell Chemical Co. and related affiliates listed assets of $27.1 billion and liabilities of $19.3 billion. It identified 79 affiliates that will file for bankruptcy protection, including one of LyondellBasell's European holding companies.

The company identified its largest unsecured creditor as the Bank of New York, which is trustee for $615 million in notes and another $241.4 million in notes at an affiliate.

Netherlands-based parent LyondellBasell is the world's third-largest independent chemical company. The company warned last week that bankruptcy was an option to restructure its debt as consumer demand continued to slow. The company had disclosed in December that several lenders let it postpone $160 million in loan payments, and credit agencies cut its ratings to junk status.

Chief Executive Volker Trautz said Tuesday the company had seen a dramatic softening in demand and volatile raw materials costs over the past two quarters.

"December was particularly difficult, as many of our customers postponed orders to reduce their inventories," he said.

LyondellBasell has announced job cuts and plans to idle some plants. Trautz said it was considering further cost-cutting steps.

Trautz said the company expects the current situation to be short term, with increased purchasing by customers this year, but that it decided to seek bankruptcy protection now to preserve resources for an orderly restructuring.

The Chapter 11 bankruptcy filing in federal court in New York covered LyondellBasell's operations in the United States and Basell Germany Holdings GmbH.

The company said it would seek bankruptcy court approval for $8 billion in debtor-in-possession financing to keep operating. The figure includes $3.25 billion in new funding, $3.25 billion from refinancing existing debt and $1.515 billion in replacement working capital facilities.

The chemical industry has been hit by falling demand and volatile energy prices in the past year.

The weak conditions contributed to the collapse of a $17.4 billion joint venture between Dow Chemical and Kuwait's Petrochemical Industries Co. Dow said Tuesday it would pursue legal action against the Kuwaiti company and could recoup $2.5 billion from it.

Dow had hoped to use money from the joint venture to help fund a $15.3 billion acquisition of specialty chemicals maker Rohm & Haas, but that deal is now in doubt.

LyondellBasell, which is controlled by American billionaire investor Len Blavatnik, has annual sales of $54.6 billion and more then 16,000 employees worldwide, according to its Web site.

Its products are used in gasoline, plastics, electronics, autos, paints and many other familiar products.

The company was formed a year ago, when Basell International Holdings paid $12.7 billion for Houston-based Lyondell Chemical, taking on debt just as oil prices skyrocketed, squeezing profit margins at chemical makers.

Then, as oil prices fell in the second half of last year, the widening recession undercut demand for chemical products.

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