CDS prices show fears Ineos could follow Lyondell

By Natalie Harrison

LONDON (Reuters) - LyondellBasell's bankruptcy protection filing has raised fears UK sector rival Ineos may suffer a similar fate, as shown by the high cost of buying protection against its debt in the credit derivatives market.

Credit default swaps (CDS) on Ineos are bid at 75 percent and offered at 85 percent, a trader said, making it the next most costly after LyondellBasell in the iTraxx Markit Crossover index. That means a buyer of protection would pay more than 7.5 million euros (6.8 million pounds) upfront to insure 10 million euros of its debt.

"There is a fear in the market that Ineos will follow Lyondell in filing for bankruptcy and a high risk that lenders will not approve the new business plan," said Jochen Schlachter, a chemicals credit analyst at UniCredit (HVB).

Ineos Group does have a broader business profile and is less reliant on volatile commodity chemicals prices than LyondellBasell, however, and is therefore less vulnerable to economic downturns, he added.

Ineos did not specifically comment but repeated an earlier statement that it was well positioned for the long term.

Trading upfront means that the sellers of debt protection consider the risk of defult to be such that they require a large downpayment. Ineos is one of 20 credits trading upfront in European CDS indexes.

The troubles at LyondellBasell ACCEIN.UL, the world's third-largest petrochemical company, had long been flagged in the European credit derivatives, with its bonds trading in low double-digits for several months and its CDS trading at upfront status for at least six months.

CDS on LyondellBasell are now bid at 90 percent upfront and offered at 100 percent on little or no trading, the trader said.