Lyondell Chemical, the bankrupt US subsidiary of Dutch chemicals major LyondellBasell, has sought court permission to pay $350 million to overseas creditors to stave off supply cuts.

The company has appealed to a New York court for permission to pay $350 million to raw material suppliers overseas lest they cut off its access to raw materials or sue it.

Lyondell Chemical Co, which moved a bankruptcy court in Manhattan, received approval on Wednesday has access to $2.167 billion in interim debtor-in-possession financing, mostly from its existing lenders. It also received a $100 million emergency loan being provided by Citibank for a 2-day period.

The funds will allow the US units of LyondellBasell, the world's third-largest maker of petrochemicals products, to continue operations.

Hit by volatile oil prices and falling demand for petrochemical products, nearly 80 LyondellBasell outfits, including its US operations, have filed for Chapter 11 bankruptcy protection.

The company needed funds for working capital as also to repay over $1 billion in debt due over the next few weeks, its chief financial officer Alan Bigman told the court.

The company, which filed for Chapter 11 bankruptcy protection on 6 December, said that its US business depended on materials supplied by foreign companies.

If these suppliers are not paid for goods they have already supplied, they could cut it off and put the company out of business, Lyondell told the US bankruptcy court in Manhattan.

Chapter 11 protects the company from its creditors in the US while it restructures business. But foreign suppliers are beyond the jurisdiction of the US courts and may sue Lyondell in another country.

This could jeopardise the company's reorganisation and put repayments to all its debtors in danger, it said.
 
The company went bust two days after a deadline passed for the payment of interest and fees on a $8 billion loan.

The company said it had borrowed up to $8 billion to fund continuing operations. Of this total, $3.25 billion consisted of new funding; $3.25 billion as a refinancing of certain obligations under LyondellBasell's existing senior secured credit facilities; and $1.515 billion as replacement of existing working capital facilities.

''We have been working collaboratively with our creditors and our equity holder on a financial restructuring that reflects the realities of today's market environment and positions us for the future," said Volker Trautz, chief executive.

"During the past two quarters, we have seen a dramatic softening in demand for our products and unprecedented volatility in raw materials costs. December was particularly difficult, as many of our customers postponed orders to reduce their inventories,'' tarutz said. ''During the reorganisation period, our goal is for the company to continue its operations and its relationships with customers and suppliers in the normal course," Trautz added.

According to its original bankruptcy filing, Lyondell Chemicals has assets of $27.1 billion and liabilities of $19.3 billion. All but one of the company's non-US businesses are continuing to operate outside the bankruptcy process.

Lyondell, which is part-owned by Len Blavatnik, the Russian billionaire, said in a statement that it expects a recovery during 2009.

Lyondell is part owned by Access Industries Holdings LLC in New York, founded by billionaire Len Blavatnik.

Apollo Management LP, the private-equity firm led by Leon Black, is among Lyondell Chemical's largest creditors. Apollo, based in New York, is also among a group of lenders providing the bankruptcy financing.

Petroleos De Venezuela, the Venezuelan state-owned oil company, was listed as the third-largest unsecured creditor, with $233.6 million in supplier debt.

Lyondell's Houston Refining unit imported an average of 198,000 barrels a day of crude oil from Venezuela in the first nine months of last year, according to US Energy Department data.

BASF Corp, the world's largest chemical producer, based in Ludwigshafen, Germany, may have a claim of $206.4 million under a disputed judgment.

Lenders including Credit Suisse AG, Merrill Lynch and Goldman Sachs also owned large pieces of Lyondell's debt.

Lyondell is one of the world's largest independent chemical producers and a global leader in polyolefins technology, with 16,000 employees and pro forma sales of $54.6 billion in the year through September, according to its web site.