LyondellBasell considers Chapter 11 bankruptcy protection

31 December 2008 11:43  [Source: ICIS news]

LONDON (ICIS news)--LyondellBasell has held discussions about entering Chapter 11 bankruptcy protection internally and with banks and outside counsel, a source at the Netherlands-based petrochemicals major confirmed on Wednesday.

“There have been internal discussions and also discussions with the banks about the possibility of Chapter 11, but there has been no confirmation either way,” said the source.

On Monday, its subsidiary Lyondell Chemical said in a filing with the US Securities and Exchange Commission (SEC) that it had begun talks with lenders in order to extend payment dates and restructure its debt. On Tuesday two major credit rating services downgraded their ratings for the company.

The source at LyondellBasell Europe said: “In Europe we are still paying our vendors and receiving payments. However, due to the economic downturn some companies are delaying payment to us or have gone out of business.

"Normally the banks would help in this situation, but the banking industry is in a worse state than petrochemicals at the moment and they have cut our overdraft going into the year end.”

The European division of LyondellBasell benefited from soaring oil costs over the summer but has suffered from falling crude prices and a drop-off in downstream demand in the later part of the year.

While 2008 was still expected to show a profit the fourth quarter results, which have not yet been closed, were likely to be negative, according to sources.

The situation on the US side of the company was reported to be more precarious.

“The shutdown of US Gulf refineries following Hurricane Ike had a tremendous effect on earnings for the US side of the company – the refineries are a cash cow for the company,” the source said.

The source. however, denied talk of cutbacks in production. “Our major plants in Europe are all running, and we have no shutdown plans other than scheduled technical shutdowns.”

By: Rachel Howat
+44 20 8652 3214

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