Update 2 – LyondellBasell adds Holding Co to Chapter 11 /ward off claims
By Aaron Gray-Block AMSTERDAM, April 24, 2009 (Reuters) –Petrochemical company LyondellBasell said it had added a Luxembourg-based holding company to its chapter 11 bankruptcy protection to ward off claims against it from financial and U.S. trade creditors.
A massive debt load and slumping demand for its products saw LyondellBasell, which has its corporate headquarters in Rotterdam, apply for chapter 11 protection in the United States in January for its U.S. operations and a German financing arm.
The world’s third-largest petrochemical company said at the time that while it sought to restructure its debt in the United States, its global operations would continue operating as normal.
‘Extending Chapter 11 protection to LyondellBasell Industries AF S.C.A. is not an insolvency proceeding under any European law,’ LyondellBasell said in a statement.
It said no manufacturing operation located outside of the United States has applied for or become involved in insolvency or bankruptcy proceedings in its respective home country.
‘The holding company is being brought into chapter 11, but that is the only one. The operating businesses of the European operations will continue to operate as normal,’ a spokesman said.
PROTECTION FROM CREDITORSLyondellBasell, which is cutting 3,000 jobs and targeting an extra $500 million in cost savings by 2010, added the Luxembourg holding company to the chapter 11 protection to prevent creditors from enforcing guarantees provided by LyondellBasell Industries AF on obligations of its U.S. businesses.
It would also prevent holders of its 2015 bonds from also potentially pursuing remedies against the company.
In February, the company missed payment of coupons on its $615 million and 500 million euro 2015 European bonds, but obtained a 60-day restraining order from the U.S. bankruptcy court to protect its European assets. The spokesman said the injunction will end on April 27. LyondellBasell took on billions of dollars in debt obligations more than a year ago when billionaire Len Blavatnik led a $12.7 billion leveraged buyout of U.S. firm Lyondell by Basell of the Netherlands. The privately held company has since suffered from a steep decline in demand for chemicals as industries such as autos, housing and electronics weakened.
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UPDATE 1-LyondellBasell CDS payout exceeds $700 million
* CDS auction sets value of contracts at 2 pct
* LyondellBasell CDS sellers to pay out about $700 mln
LONDON, April 16, 2009 (Reuters) – Sellers of protection on the debt of petrochemical company LyondellBasell Industries will pay out more than $700 million to settle credit default swaps after an auction on Thursday.
Europe’s first auction of CDS on a high-yield company set the final value of the contracts at 2 percent, according to results published by auction administrators Creditex and Markit, which means a payout of 98 percent.
Outstanding CDS on LyondellBasell amounted to a total net notional value of $715 million as of March 27, according to the Depository Trust & Clearing Corp, which registers most but not necessarily all CDS contracts.
Before the auction, LyondellBasell cash bonds traded at 3.75 percent of par value, a trader said earlier in the day.
The Rotterdam-based company last month said it would not make interest payments on 2015 bonds, a move that triggered payment under CDS contracts.
One twist particular to this credit event is that LyondellBasell has not yet legally defaulted on repayment of its bonds. The European company is in legal limbo as it seeks to stave off a bankruptcy filing that could lead to a liquidation.
The U.S. operations, Lyondell Chemical Co, filed for Chapter 11 bankruptcy protection months ago, but it has won an injunction that prevents holders of the 2015 bonds from taking action against the European business.LyondellBasell’s debt amounted to 18.9 billion euros as of mid-December, according to Standard & Poor’s. The bulk of that debt is in the form of syndicated loans, which rank higher than bonds.
A total of 234 investors signed agreements to settle through the auction process.
(Reporting by Claire Milhench and Jane Baird; Editing by David Cowell)
