Lyondell trade debt gets settlement priority

08 January 2009 05:20  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS news)—The US Bankruptcy Court has approved on Thursday a request by Lyondell Chemical Company, a LyondellBasell affliate, to give debt settlement priority to trade obligations after it filed for bankruptcy protection on 6 January.

LyondellBasell had earlier petitioned the court to grant administrative expense priority status to the undisputed obligations arising from supplies, materials and services of its 79 affiliated companies.

“Absent such relief, vendors may require the debtors (Lyondell’s affiliates) to reissue prepetition service or purchase orders in order to obtain administrative expense priority for their claims relating to supplies, materials or services being received post-petition,” LyondellBasell said in a court filing.

The classification of a liability as either pre-petition or post-petition has significant influence on the amount the company will have to pay for the liabilities.

A pre-petition liability is likely to only get a fraction of its original value, while a post-petition liability will likely be paid in full - assuming the company exits bankruptcy protection in good shape.

“Any disruption in the flow of good or services could jeopardise the debtors’ operations at this critical time during which the debtors must maintain the confidence of, among others, the suppliers that are essential to the debtors’ businesses,” Lyondell added.

The company announced earlier that, pending court approval, it has made arrangements for up to $8bn (€5.92bn) in debtor-in-possession (DIP) financing to fund continuing operations.

Despite having filed for bankruptcy protection, trade operations of LyondellBasell in Asia seemed to have remained largely unaffected according to market sources.

“Lyondell is still actively offering propylene oxide (PO) into the market,” said an end-user from China-based Kukdo Chemical (Kunshan) Co. Ltd who used to off-take monthly cargoes from the financially stricken company

“Until now, we have not received any bankruptcy information from the company. And the cargo supply is still normal,” said a polypropylene (PP) trader from Zhejiang Grand Imp. & Exp Co. Ltd  who bought over 20,000 tonnes of material from LyondellBasell in November and December 2008.

“Sales and supplies are all running normally,” said LyondellBasell’s Shanghai representative adding that a large portion of the company’s $19bn debt are with trade partners in Europe and the US.

Attempts to reach LyondellBasell’s joint venture suppliers of propylene in Asia have not been successful.

($1 = €0.74)

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By: Bohan Loh
+65 6780 4359

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