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| Edited By: |Source: DNA |Updated: Mar 29, 2018, 06:09 AM IST
Is Reliance Industries Ltd (RIL) throwing a lifeline to bankrupt LyondellBasell, one of the world’s largest polymers, petrochemicals and fuels companies?
The buzz on the street is may be: RIL may be weighing buying a chunk of the company at distress valuations.
An RIL spokesperson declined to comment, but said the company is “committed to growth and creating value for long-term investors. Its sale of treasury shares on Thursday indicates the management intends to make large investments”.
The Netherlands-based LyondellBasell had combined revenues of $50.7 billion (Rs 250,000 crore) in 2008, compared with $30 billion (Rs 150,000 crore) for RIL.
The company, which had $27 billion in assets and $19 billion in debt, filed for Chapter 11 under the US Bankruptcy Code on January 6 this year.
The US bankruptcy court for the southern district of New York is overseeing the restructuring and reorganisation process.
Bank of America-Merrill Lynch, Royal Bank of Scotland and Citigroup are among the lenders to the company, which obtained debtor-in-possession financing of $8.1 billion in February this year.
LyondellBasell is now offering a partial exit to these bank lenders by offering equity through a rights issue, which is expected to hit the market in October.
CNBC TV-18 quoted LyondellBassell as saying the company “does not not know who will be rights offering sponsor and details of the issue will be determined in the next few weeks”
Analysts said if this is indeed true, the lenders may get into a pre-offer arrangement under which RIL will pick up some of the forfeited rights and directly pay the lenders for the stake.
This would entail a minimum payment of $3.25 billion or Rs 15,000 crore to the lenders, sources said.
Another analyst with a foreign brokerage said he’s not enthused about European petrochemicals business due to the structural downcycle in the continent.
Another problem, sources familiar with LyondellBassell pointed out, is that the company does not have feedstock sources of its own: it buys propylene, the feedstock, from Shell or Hoechst, sources said.
RIL produces about 1.8 million tonnes of propylene per annum in Jamnagar, which the petrochem giant consumes captively.
“If there is no feedstock linkage, buying does not make any sense,” said an analyst.
LyondellBasell has over 60 manufacturing facilies spread across 19 countries.
On December 20, 2007, Basell, which was owned by Access Industries, acquired Lyondell Chemical Company through an all-cash deal at $48 per share and then merged the two.
