Lifeline for troubled LyondellBasell
pharmafile | January 8, 2009 | News story | Manufacturing and Production | Lyondell, excipients
LyondellBasell, the world’s third-largest petrochemical company and a supplier of a number of pharmaceutical raw materials, has filed for Chapter 11 bankruptcy protection as it copes with a major cashflow crisis.
The company warned late last year it may have to consider bankruptcy protection – a mechanism which allows companies to reorganise their debts under court supervision while continuing day-to-day operations.
All LyondellBasell’s US operations are named in the filing, as well as European affiliate Basell Germany Holdings GmbH.
LyondellBasell was formed last December when Dutch chemical company Basell bought Lyondell Chemical of the US in a transaction valued at around $19 billion.
Overhanging debt from that deal, plus a softening in demand for its products and rocketing raw materials prices are the root causes of the firm’s precarious situation.
The company has been struggling to pay its financial backers $160 million fees for a bridging loan arranged in December 2007 to finance the acquisition, as well as $121m in interest.
In a statement, LyondellBasell said it had arranged around $8bn in financing, including $3.3bn in new loans, that should help it continue operating as normal for the time being.
As of September 2008, the company was sitting on more than $18bn in debt, mainly consisting of loans and junk bonds, and around $1bn in debt is due to mature in the coming weeks.
“December was particularly difficult, as many of our customers postponed orders to reduce their inventories,” the firm said in a statement, adding: “we anticipate this situation to be short-term and customers to increase their purchasing in 2009.”
Among pharmaceutical companies LyondellBasell is best known as a supplier of excipients and intermediates, as well as packaging materials such as collapsible tubes, caps and closures.
The company’s excipient range includes ethanolamines, ethyl alcohol, propylene glycol industrial grade and propylene glycol USP/EP, while its reaction intermediates include diethyl ethers, ethyl alcohols, ethanolamines, TBAc tertiary butyl acetates, and Tebol high purity tertiary butyl alcohol products.
LyondellBasell said it has also retained AlixPartners, which specialises in the turnaround of troubled companies, to help with the restructuring efforts. AlixPartners’ Kevin McShea has been appointed chief restructuring officer at the chemicals firm.
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