LyondellBasell Industries, the world's third-largest independent chemical company, told lenders ysterday that it was considering filing for bankruptcy protection amid plunging sales and a cash crunch, people familiar with the matter told The Wall Street Journal.
LyondellBasell, which is based in the Netherlands and has large US operations, has hired bankruptcy counsel and told lenders it is trying to line up as much as $2 billion in bankruptcy financing, these people told the newspaper, saying, a Chapter 11 filing may be imminent.
Chemicals companies have struggled this year from a double-whammy of high commodities prices that sent production costs soaring earlier this year and then more recently from a drop off in demand for chemicals as the global economy has slowed.
Earlier in the month, citing the challenging market and economic conditions, LyondellBasell said its unit Equistar Chemicals LP would temporarily idle a chemicals plant in Chocolate Bayou, Texas.
Earlier on Tuesday, rating agencies Standard & Poor's and Moody's Investors Service cut their ratings on the company's debt. S&P slashed the company's long-term corporate credit rating multiple notches to 'selective default' from B minus, while Moody's cut the company's rating two notches to Caa2 from B2.
LyondellBasell said S&P's definition of selected default "should not be misinterpreted to suggest that LyondellBasell is currently in default of its bank agreements."
The company was formed last year when Dutch chemicals company Basell International bought its US competitor, Houston-based Lyondell Chemical Co, in an all-cash $12.7-billion deal. Basell is part of Access Industries, a privately-held company founded by Russian billionaire Leo Blavatnik. (See: Basell to acquire Lyondell for $12 billion)
The debt burden from the deal is proving to be detrimental for the company that has annual sales of about $54 billion and 16,000 employees. Quoting people familiar with the matter, the report said the privately-held company is trying to line up as much as $2 billion in bankruptcy financing.