LyondellBasell Industries AF SCA has turned its attention to its European polyolefins operations as part of a plan to restructure and deal with a $23 billion debt burden.
The Rotterdam, Netherlands-based company filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on Jan. 6. The filing covered LyondellBasell's U.S. operations and not those in Europe. But, its assets review is encompassing global operations so the company can meet a restructuring target of cutting $700 million in fixed costs by the end of 2010.
The chemicals and polymers group is midway through developing its reorganization plan, and has a target date of mid-August to present it, according to Vaughn Deasy, senior vice president of base chemicals and polyethylene.
North American operations have taken the brunt of shutdowns up to now and are unlikely to be part of the August announcement, Deasy said in a 23 June interview at NPE2009 in Chicago.
In North America, we think we're done, he said.
There are a lot of challenges in reviewing operations at its various European locations in 13 countries, and Deasy did not name specific sites that could be closed.
We are currently spending a lot of time on what should be done, and what could be done in Europe, he said.
LyondellBasell is an integrated olefins/polyolefins group and in North America 75 percent of its ethylene production is used for its own PE production. The company is the No. 2 maker of both high density PE and low density PE in North America.
But in Europe, the situation is different and its ethylene production does not cover all of its PE needs.
One problem is what Deasy calls the pocketed nature of European regional production, which adds complexity to decisions about which plants will contribute in the longer term and which may need to close because of their cost position.
LyondellBasell's capital structure will look very different following its reorganization. Although Deasy could not reveal details of what will be announced in August, he said there will be very little, if any, asset sales.
Many people have speculated about a possible sale of assets, he said. But given that market values are so low today, we don't see that as an attractive alternative to generate value.
The company believes its value lies in holding together a global entity, and Deasy said LyondellBasell has support for that view from its financial creditors.
There is a lot of work for the firm's senior management team to do, but they are meeting all deadlines in the restructuring process and hope to emerge from Chapter 11 by a target date of mid-December.