Nov. 23 (Bloomberg) -- The cost of protecting Reliance Industries Ltd.’s debt from default rose after the refiner and energy explorer controlled by billionaire Mukesh Ambani bid for bankrupt chemicals and fuels maker LyondellBasell Industries AF.

Credit-default swaps written on Mumbai-based Reliance’s bonds and loans rose 2.5 basis points to 157.5 basis points as of 5:11 p.m. in Singapore after jumping by as much as 5 basis points, Royal Bank of Scotland Group Plc prices show.

The derivatives, which pay the buyer face value if a borrower defaults in exchange for the underlying securities or cash equivalent, rose as analysts at Standard & Poor’s and Moody’s Investors Service said they’re seeking information about the offer to assess its potential impact on Reliance’s ratings.

“I personally don’t see any sort of operational or cost synergies for Reliance,” Jagdish Meghnani, an oil and gas company analyst for Alchemy Share & Stock Brokers Ltd., said by telephone from Mumbai today. “The only benefit that could come is access to some international markets in Europe or the U.S. and access to high-end technology of specialist chemicals.”

Reliance offered to buy Rotterdam, Netherlands-based LyondellBasell for cash as it seeks “global opportunities for growth in its core business,” it said in a Nov. 21 statement. The company has said it is looking for assets abroad to reduce the risk of investing mostly in India, where it is battling a lawsuit over natural gas supplies with a firm owned by Mukesh’s estranged brother, Anil Ambani.

$12 Billion

Reliance may pay as much as $12 billion for closely-held LyondellBasell, said Victor Shum, an analyst at Purvin & Gertz Inc. in Singapore. The two companies didn’t disclose terms of the offer in separate statements and Reliance spokesman Manoj Warrier declined to comment on the valuation.

S&P is seeking more information before reviewing Reliance’s BBB credit rating, the risk assessor’s second-lowest investment grade, analyst Suzanne Smith said in a phone interview from Mumbai today.

“The information provided to the press doesn’t provide enough information to make a full assessment” of the debt burden Reliance may take on with the acquisition, she said.

Moody’s Baa2 rating on Reliance’s senior unsecured debt is also “under discussion,” analyst Ivan Palacios said in a phone interview from Singapore.

Moody’s said in a separate statement that Reliance’s $4.2 billion in cash and liquid investments and about $8 billion in treasury shares could provide “significant resources to fund a potential deal without materially impacting its financial metrics.”

‘Downward Pressure’

“However, depending on the total size of the deal and whether or not the acquisition is to be majority debt funded, it could result in downward pressure on” Reliance’s credit rating, Palacios was cited as saying in the statement.

LyondellBasell has $7.06 billion in bonds and loans due to mature next year and a further $20 billion due through 2027, according to data compiled by Bloomberg. S&P said Feb. 16 that it lowered its long-term corporate rating on the company to “default” after it missed payments on two notes a day earlier.

The yield on Reliance’s $130 million of 7.625 percent bonds due August 2027 rose for the first time in two weeks, widening to 8.498 percent from 8.497 percent, according to RBS prices.

The extra yield investors demand to own the notes is equivalent to a spread of 428 basis points more than U.S. Treasuries, according to RBS. Akron, Ohio-based FirstEnergy Corp.’s $600 million in 6.05 percent notes, due 2021 and rated Baa2 by Moody’s, are trading at a 213 basis point spread, Deutsche Bank AG prices show.

Reliance shares rose as much as 4 percent to 2,207.75 rupees and closed at 2,194.95 in Mumbai. The stock has gained 78 percent this year, matching the advance in the benchmark Sensitive Index.

Credit-default swaps on Reliance rose 9 basis points to 149 basis points Nov. 20 after trading at a year-low of 115 basis points on Oct. 26, according to CMA DataVision in New York. A basis point, or 0.01 percentage point, is equivalent to $1,000 a year on a contract protecting $10 million of debt for five years.

To contact the reporter this story: Katrina Nicholas at Knicholas2@bloomberg.net

Last Updated: November 23, 2009 05:37 EST