Dutch petrochemicals major LyondellBasell files for bankruptcy
07 January 2009
Netherlands-based LyondellBasell, the world's third-largest petrochemical company, has filed for bankruptcy protection under the weight of a massive debt load and slumping demand for its products. (See: Chemical maker LyondellBasell may be on the brink of bankruptcy)
The Chapter 11 filing, made in the US bankruptcy court in the southern district of New York, included Houston-based Lyondell Chemical Co, 79 other US affiliates and one European holding company. Assets were listed at $27 billion and debts at $19 billion.
LyondellBasell said it has already arranged up to $8 billion in debtor-in-possession (DIP) financing to cover ongoing operations, including $3.25 billion in new funding. Another $3.25 billion has been earmarked to refinance debt and nearly $1.52 billion will be used to cover existing working capital requirements.
CEO Volker Trautz assured the firm would keep running during the restructuring. ''Our goal is for the company to continue its operations and its relationships with customers and suppliers in the normal course,'' he said in a statement. ''We are aggressively exploring additional ways to lower our costs and streamline operations in a response to a very difficult global economic environment.''
The privately-held Rotterdam-based company, forged in December 2007 in a highly-leveraged $12.7 billion takeover of Lyondell Chemical by billionaire Len Blavatnik's Basell AF, has been struggling under a heavy debt load while demand for such core products as transport fuel, plastics and paint unraveled in the current global economy.
Blavatnik's privately held industrial group Access Industries said it has provided $750 million of the $3.25 billion of new DIP financing committed to LyondellBasell's restructuring effort. LyondellBasell said "unprecedented volatility" in raw material costs and a "dramatic softening" of demand for its products had hobbled business in the second half of 2008. That trend accelerated in December as customers postponed orders in a bid to draw down their own inventories.
"Though we currently anticipate this situation to be short-term and expect customers to increase their purchasing in 2009, we made the decision to file Chapter 11 in order to provide the company wit the time and resources necessary to facilitate an orderly restructuring and position the business for the long term," Trautz said.
LyondellBasell, with 17,000 workers and revenues of $44.7 billion in 2007, has seen its liquidity drop to $639 million currently from $1.67 billion at the end of the third quarter, falling short of its quarterly interest and maintenance costs.