Lyondell bonds at rock bottom on bankruptcy fears

LONDON/AMSTERDAM Jan 5 (Reuters) - Bonds of petrochemical company LyondellBasell, which is saddled with $26 billion in debt, remained at just 4 percent of face value on Monday after a Jan. 4 deadline to renegotiate the terms of its debt passed.

Privately held LyondellBasell [ACCEIN.UL] said last week it was considering chapter 11 bankruptcy protection in the U.S., but a Netherlands-based spokesman for the world's third-largest petrochemicals firm declined to comment on Monday morning.

LyondellBasell's 500 million euro bond US022628569=, due to mature in 2015, was bid at 4 percent of face value and offered at 8 percent on Monday, a trader said.

The bonds sank to that level last week on talk the company was considering a bankruptcy filing, but were already bid at just about 8 percent of face value in the weeks prior to Christmas.

The trader said recovery rates on the bonds were seen in a range of zero to 10 percent.

The company, the world's third-largest petrochemicals company, also has a $615 million bond maturing in 2015.

Analysts at independent research firm Credit Sights said a Chapter 11 filing was the most likely outcome for the company, which employs 17,000 people and had combined pro-forma annual revenues of $44.7 billion in 2007.

"The company has no near-term debt maturities, but the amount of debt that LyondellBasell has is unsustainable under current conditions, and the options available are minimal," Credit Sights analysts Andrew Brady and Wen Li said in a note published on Monday.

LIMITED OPTIONS

Asset sales, such as the possible disposal of its Houston refinery, would be time-consuming and are unlikely to realise full value in the current economic climate.

An out-of-court restructuring, though favourable from a cost perspective, would also be complex given the company's liquidity profile and needs timely agreement from all stakeholders, the analysts added.

The company's liquidity profile has deteriorated rapidly to $639 million from $1.67 billion at the end of the third quarter, which is less than the quarterly cash requirements for interest expenses and maintenance capex, Credit Sights analysts said.

The position was made worse by a denial from parent company Access Industries for a $750 million credit facility, and LyondellBasell was also renegotiating $281 million in fee and interest payments with its creditor banks, they added.

"The substantial deterioration in its (LyondellBasell's) liquidity position provides minimal headroom for the highly leveraged company to navigate through the current economic conditions, and a Chapter 11 filing is the likely outcome," Credit Sights said.

LyondellBasell was formed in 2007 via a merger between the Dutch-based Basell, a unit of Russian-born billionaire Len Blavatnik's Access Industries, and Houston-based Lyondell in $12.7 billion deal.

The company said in a SEC filing last week that softening demand combined with an unprecedented fall in commodity prices had placed severe demands on its liquidity. (Reporting by Natalie Harrison and Aaron Gray-Block, editing by Will Waterman)