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LyondellBasell in talks ahead of Jan. 4 deadline

NEW YORK, Jan 2 (Reuters) - LyondellBasell, the world’s third-largest petrochemical company, said on Friday it is still renegotiating terms on its debt ahead of a Jan. 4 deadline, as market bets increased it may file for bankruptcy protection.

“We continue to work collaboratively with our banks to find the most effective way to restructure,” spokeswoman Susan Moore said.

The company said earlier this week it was considering a Chapter 11 bankruptcy filing. The cost of insuring the company’s debt in the credit default swaps market rose this week on expectations it will end up in bankruptcy court, sources told Reuters Loan Pricing Corp. [ID:nRLP69027a]

Experts said recent events, including the Dec. 31 disclosures that its parent company Access Industries had denied its $750 million revolving credit line and that it has lined up a chief restructuring officer if bankruptcy court approves him, indicate bankruptcy is a likely outcome.

“You’ve got technical defaults. You’ve got the clampdown on your revolver ... and then you’ve got, of course, the ultimate, which is that the chief restructuring officer is going to be hired -- contingent upon approval of the bankruptcy court. That would mean that they anticipate very quickly a filing,” said Jack Williams, resident scholar at the American Bankruptcy Institute.

Williams added that LyondellBasell Industries [ACCEIN.UL], which is owned by Russian-born billionaire Len Blavatnik through New York-based Access, would likely file in bankruptcy court in either New York or Delaware in addition to the Netherlands.

The company, which has $26 billion in debt, was formed at the end of 2007 when Dutch-based Basell, which had been acquired by Access in 2005, bought Houston-based Lyondell.

The company has suffered due to plunging demand for chemicals as industries such as autos, housing and electronics have weakened. Tight credit markets have made renegotiating debt difficult.

LyondellBasell disclosed earlier this week that it had postponed $280 million in debt and debt-related payments to its lenders. The second postponement set a Jan. 4 deadline on those payments.

Fitch Ratings followed Standard & Poor’s and Moody’s ratings downgrades with a cut of its own on Friday, citing LyondellBasell’s disclosure of a possible bankruptcy filing. It also pointed to the company’s disclosure that on Dec. 30, the $750 million revolving credit line that was established between it and an Access unit had been denied.

Access declined to comment on the move.

Access’s denial of credit was typical of a lender considering making more loans to a company approaching bankruptcy, said Anthony Sabino, a law professor at St. John’s University in the Tobin School of Business in New York.

“Most likely they (Access) are trying to stop the bleeding and see if the company can reorganize on their own,” he said. (Reporting by Caroline Humer; Editing by Gary Hill)