LyondellBasell Sells $3 Billion in Bonds to Fund Debt Buyback

LyondellBasell Industries NV, the chemical maker that emerged from bankruptcy in 2010, sold $3 billion of bonds to buy back higher-cost debt.

The world’s third-biggest independent chemical company issued $2 billion of seven-year, 5 percent notes that priced to yield 337 basis points more than similar-maturity Treasuries and $1 billion of 12-year, 5.75 percent bonds that yielded 323 basis points more than government debt, according to data compiled by Bloomberg. Proceeds will help fund a tender offer for the firm’s 8 percent senior secured notes due in 2017 and 11 percent bonds maturing in 2018, the Rotterdam-based company said today in a statement.

LyondellBasell is refinancing as management seeks to lift its credit ratings from junk status and to cut interest expenses to below $200 million from about $800 million in 2010, according to a Feb. 22 presentation. Standard & Poor’s raised the chemical maker’s corporate credit rating today to BBB-, the lowest step of investment-grade.

“This is an additional play to move into the investment-grade level and refinance into lower rates,” Wen Li, an analyst at CreditSights Inc. in New York, said in a telephone interview. “If the economy continues at the current pace, and they continue to make huge amounts of profit and move their capital structure in a way to appease the rating agencies, they should be able to.”

Bankruptcy Filing

LyondellBasell filed for bankruptcy protection in January 2009 when it ran short of cash as demand for chemicals and plastics plummeted during the worst recession in seven decades.

Moody’s Investors Service raised LyondellBasell’s corporate family rating in November to Ba1, one level below investment-grade, after the company announced a previous buyback of its debt.

“LyondellBasell has performed strongly and generated significant cash since emerging from bankruptcy,” S&P analysts led by Cynthia Werneth in New York wrote in a statement today. The company “has adequate sources of liquidity to cover its needs, even in the event of a sharp drop” in earnings before interest, taxes, depreciation and amortization costs.

LyondellBasell, which analysts surveyed by Bloomberg estimate will increase adjusted net income for a second year in 2012, is selling new debt to finance the purchase of as much as $2.7 billion of outstanding borrowings, the company said in a separate statement today. The offer expires April 20.

Moody’s assigned the new notes a Ba2 rating, two levels below investment grade, the rankings firm said in a statement today. That’s the same as the debt the company is seeking to repurchase.

S&P rated the bonds BB+, one level below investment grade, to match its grade for the company’s existing bonds. That’s below the corporate rating because the new bonds will be subordinate to obligations of LyondellBasell’s subsidiaries, S&P said.

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