Debt-stricken petrochemicals giant allowed to borrow over 2 billion dollars after US arm files for bankruptcy
LyondellBasell, the world’s third-largest petrochemicals group, has gained permission from a US bankruptcy court to borrow $2.2 billion, along with an emergency $100 million loan, to avoid going into liquidation.
The company is looking for a total of $8 billion in loans after it placed its US operations and one of its European holding companies into Chapter 11 bankruptcy on 7 January. According to Lyondell lawyer Andrew Troop, the $100 million ’super emergency’ loan was enough to fund the company’s operations for just two days.
LyondellBasell has total debts of around $26 billion, much of it incurred when Netherlands-based Basell bought US-based Lyondell Chemical in December 2007 for $12.7 billion plus debt. With demand for chemicals falling sharply in the recession, the company has been unable to renegotiate immediate debt payments and maintain operations.
In December 2007, it reduced production by around 50 per cent and cut some 2,500 jobs, 15 per cent of its workforce. After trying to restructure repayments due to lenders, the company was forced to file its US arm for Chapter 11 bankruptcy protection, in order to gain relief from debts. Its operations will now be closely monitored by the overseeing bankruptcy court as it reorganises its finances, possibly by selling assets.
’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. 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 with the time and resources necessary to facilitate an orderly restructuring and position the business for the long term,’ said Volker Trautz, LyondellBasell’s CEO.
The company’s non-US operations will continue to function independent of the Chapter 11 process, it said.
According to analysts from credit ratings agency Standard and Poor’s, the general downturn in demand for petrochemicals is unlikely to reach its trough until 2010, although a slightly improving outlook is forecast during the year ahead.
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