The Work

December 31, 2008 10:45 AM

Skadden, Cadwalader Reportedly on Next Chemical Maker Bankruptcy

Posted by Zach Lowe

As we roll into 2009, it's clear the bankruptcy filings won't stop. On Monday, it was the Parent Company, an online retailer specializing in children's toys. Today, The Wall Street Journal reports that chemical giant LyondellBasell is preparing for a possible Chapter 11 filing.

The Dutch company, beset by massive debt and fresh off a downgrade of its bond rating courtesy of Standard and Poor's, has hired Skadden, Arps, Slate, Meagher & Flom and Cadwalader, Wickersham & Taft to advise on restructuring issues, the WSJ says. Skadden advised Basell International Holdings in the $18.8 billion merger that created LyondellBasell last year, according to our deal report

Jack Butler and Timothy Pohl, cochairs of Skadden's restructuring group, did not immediately return calls seeking comment. Deryck Palmer, cochair of Cadwalader's restructuring practice, declined to  comment when reached by phone. 

A LyondellBasell spokeswoman told the WSJ the company wouldn't comment on "rumors." 

Like many global producers, LyondellBasell has been buffeted by a confluence of bad economic trends over the last year, according to the WSJ, Bloomberg, and Reuters. First came the spike in prices for such commodities as oil and gas. Then, when prices for those goods finally fell, consumers looking to save money amid the economic crisis stopped buying LyondellBasell's final product.

It doesn't help that LyondellBasell is carrying about $26 billion of debt, most of it connected to the 2007 merger between Basell International Holdings and Houston-based Lyondell Chemical Co. that created the combined company, Bloomberg says.

Lenders on that transaction, a group that includes Goldman Sachs and Citigroup, may lose as much as 90 percent of their money, Bloomberg says. Lyondell debt is trading at pennies on the dollar, and S&P downgraded the company's debt to "selective default" after the company said it would have to delay $280 million in interest payments to lenders. 

The combined company is a division of Access Industries, a group founded and controlled by the Russian billionaire Len Blavatnik. 

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