RIL move on LyondellBassel enthuses market

24 Nov 2009

Bonds of LyondellBasell as well as Reliance Industries Ltd scrip surged on Monday as investors gave the thumbs up to RIL's plan to buy a controlling stake in the bankrupt US petrochemical maker

LyondellBasell said on Saturday that Reliance made a nonbinding cash offer to buy a controlling interest in the company, marking a potential alternative to its previously filed reorganisation plan to emerge from Chapter 11 bankruptcy. (See: Reliance makes a bid for Dutch petrochem major LyondellBasell)

RIL, the nation's largest company, also said on Saturday said it had submitted an all-cash but non-binding bid to buy a controlling interest in LyondellBasell, if it emerges out of bankruptcy.

If successful, the acquisition may help RIL rub shoulders with the biggest in the game. But RIL's bonds fell, as the company may have to borrow billions of dollars if it manages an agreement to buy Lyondell, which may be many months away.

Although the company has not disclosed the potential value of the bid, sources and analysts expect it to be around $12 billion in enterprise value. Enterprise value is calculated as equity value plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

LyondellBasell has $7 billion in bonds and loans due to mature next year and another $20 billion due in 2027, according to Bloomberg data. A plan under the bankruptcy court seeks to cut total debt by $18 billion.