Lyondell to Pursue $3.25 Billion Debt Financing
LyondellBasell said late on Thursday its unit Lyondell Chemical plans to raise $3.25 billion in debt, including a senior secured note issue, as the chemical company charts its course out of bankruptcy.
The senior secured notes will be a $2.25 billion equivalent issue in dollars and euros with a 7.5-year maturity, according to IFR, a Thomson Reuters service. Bank of America Merrill Lynch, UBS and Barclays are managing the sale.
Lyondell is also seeking a $1 billion six-year senior secured term loan, according to Reuters Loan Pricing Corp.
Proceeds from the notes, term loan and a $2.8 billion rights offering will be used to repay debtor-in-possession credit facilities and other debt, the company said in a statement.
Private equity firms Apollo Management LP and Ares Management, along with holding company Access Industries, have agreed to back a $2.8 billion rights offering under which Lyondell would issue 263.9 million Class B shares, according to a disclosure statement.
Also on Thursday, the company won court approval for a $450 million settlement to resolve litigation with creditors over its 2007 leveraged buyout and pave the way for the chemical company's bankruptcy exit.
The company filed for bankruptcy in January 2009 amid a sudden cash crisis under the weight of billions of dollars of debt and a recession-driven decline in global demand for petrochemicals. Lyondell is tapping the high-yield bond market at a time of renewed appetite for riskier assets as an economic recovery lowers corporate defaults.
"The market is willing to bear greater appetite for risk; people are stretching for yield and there isn't much else yielding higher the junk bonds right now," said Sandy Rufenacht, high-yield portfolio manager with Three Peaks Capital Management in Denver, Colo.
"All the deals are going well so I don't see any reason for this one not to," he said. "Everyone is chasing yield."
Loans are a more traditional source of funding for bankruptcy exits than bonds and the fact that Lyondell is using more bonds than loans may reflect the strong investor demand for bonds, said Kingman Penniman, president of high-yield research firm KDP Investment Advisors in Montpelier, Vt.
Both the loans and bonds will be senior secured obligations of Lyondell Chemical and guaranteed by LyondellBasell Industries.
