Lyondell declares bankruptcy amid slumping chemical market
U.S. operations of LyondellBasell cite slumping demand
By Dave Hannon -- Purchasing, 1/7/2009 12:37:00 PM
Lyondell Chemical, the U.S. subsidiary of LyondellBasell, has filed for Chapter 11 bankruptcy protection, citing a continuing demand slump for reduced income. The Chapter 11 filing applies only to LyondellBasell's operations in the U.S. and one of its European holding companies, Basell Germany Holdings. LyondellBasell has made arrangements for up to $8 billion in debtor-in-possession (DIP) financing to fund continuing operations.
“During the past two quarters, we have seen a dramatic softening in demand for our products and unprecedented volatility in raw materials costs,” says Volker Trautz, CEO of the parent company, in a statement. “December was particularly difficult, as many of our customers postponed orders to reduce their inventories… We are aggressively exploring additional ways to lower our costs and streamline operations in response to a very difficult global economic environment.”
Bloomberg reports that private-equity firm Apollo Management is among Lyondell Chemical’s largest creditors, according to a person with direct knowledge of the matter. Apollo, based in New York, is also among a group of lenders providing the bankruptcy financing, said the person, who asked not to be identified because Apollo’s stake hasn’t been disclosed.
The filing is yet another indication that the chemicals industry is seeing demand and pricing drop off the table in the past few months. While there had been ongoing concern about Lyondell’s financial state, most market watchers were not expecting a filing so soon. “They have no pricing power and volumes are down,” Gene Pisasale at PNC Capital Advisors in Baltimore told Bloomberg. “With that combination, you’re heading into the trough.”
“Nobody anticipated the rapid falloff that we’ve seen,” Vance Scott, leader of consulting firm A.T. Kearney’s energy and chemicals practice for the Americas, told the Houston Chronicle.
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