Ineos Olefins & Polymers USA has offered $1 million in cash to LyondellBasell Industries AF SCA to buy a Texas resin plant that is set to close its doors by the end of September.
In recent court filings, officials with Houston-based Ineos said the firm has the option to buy the high density polyethylene plant in Alvin, Texas at a site known as Chocolate Bayou according to a 1988 pact between the predecessor companies of both firms.
On top of the $1 million cash offer, Ineos would commit to buy 8 million to 10 million pounds of ethylene feedstock from LyondellBasell each month through 2010. Ineos also would drop a $4.5 million claim for capital recovery costs, officials said in a June 5 filing with U.S. Bankruptcy Court in New York.
Ineos officials in a July 13 statement confirmed their attempts to save the plant from closure and demolition. Ineos has made a firm offer for the facility, which it believes remains viable, they said.
The potential sale of the plant is one of several topics that will be covered at a bankruptcy court hearing Aug. 11. LyondellBasell spokesman David Harpole said the hearing will give greater clarity to our next step.
Harpole added via phone that LyondellBasell continues to explore ways to maximize the value of the Chocolate Bayou site. But he also said the firm hasn't received a viable offer for the plant.
At this time, the most cost-effective option is demolition and the scrapping or sale of any equipment, Harpole said.
LyondellBasell based in Rotterdam, the Netherlands, with U.S. offices in Houston announced in May that it would close and raze the plant, which has annual capacity of almost 500 million pounds of HDPE. The site employs 50 and is one of the firm's oldest plants, opened by USI Inc. in the 1970s.
At the time the closing announcement was made, LyondellBasell officials said the firm made the move because of low profit margins, excess capacity and declining U.S. PE demand.
LyondellBasell's U.S. operations and one of its European holding companies filed for Chapter 11 bankruptcy protection in January, citing drastic drops in demand for plastics and chemicals. The firm has a $23 billion debt load connected to Basell NV's $19 billion purchase of Lyondell Chemical Co. in late 2007.
Ineos' parent firm Ineos Group of Lyndhurst, England has had financial troubles of its own. On July 16, the firm reached agreement with its senior lenders to reset financial covenants related to its debt. Like the rest of the plastics and chemicals industry, Ineos has struggled with decreased demand and poor profitability.
In 2008, Ineos cut its fixed costs by about $175 million and planned to cut another $250 million this year. Capital expenditures for 2009 also were reduced from $760 million to less than $320 million.
LyondellBasell is the world's largest polyolefins maker, and ranks first in polypropylene capacity. The firm ranks second in the North American HDPE market, based on estimated annual sales, with Ineos placing No. 4.
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