Case | HBS Case Collection | December 2009 (Revised February 2010)

Lyondell Chemical Company

by Stuart C. Gilson and Sarah Abbott

Abstract

Hit with an industry recession and the global financial crisis of 2008, in January 2009 LyondellBasell Industries AF S.C.A., one of the world's largest internationally diversified chemical companies headquartered in The Netherlands, placed its U.S. operations and a German subsidiary under U.S. Chapter 11 bankruptcy protection. To successfully reorganize as a going concern, the company sought to raise over $8 billion in a super-priority "Debtor-in-Possession (DIP)" loan from a group of 13 financial institutions, including commercial banks, investment banks, hedge funds, and private equity funds. Representing one of the largest DIP loans in history, this financing was considered critical to the company's survival. One unique and controversial feature of the financing was a $3.25 billion “roll-up” facility, under which a number of Lyondell's pre-bankruptcy lenders were allowed to significantly elevate the priority of debts they were already owed (so that they ranked ahead of all other pre-bankruptcy debts owed by the company), provided the lenders advanced new loans to the company to help finance its restructuring. With a costly liquidation as the alternative, various creditor groups objected to the DIP financing package, putting Lyondell's reorganization, and survival as a going concern, at significant risk.

Keywords: Restructuring; Financial Crisis; Borrowing and Debt; Capital Structure; Insolvency and Bankruptcy; Financing and Loans; International Finance; Crisis Management; Chemical Industry; Netherlands; United States;

Citation:

Gilson, Stuart C., and Sarah Abbott. "Lyondell Chemical Company." Harvard Business School Case 210-001, December 2009. (Revised February 2010.)