The buyout boom's big meltdown

Chemical companies are faring particularly badly as they struggle to cope with enormous levels of debt.

"Think you've got it bad? Try being a chemical company," said Lex in the FT. Lyondell Basell, a European giant, is on the brink of bankruptcy as it buckles under $26bn of borrowings. Ineos, the UK's largest private company, is having a hard time dealing with its $10bn debt load although a renegotiation with lenders last month has "bought time". And US behemoth Dow Chemical faces major problems after a joint venture with a Kuwaiti government firm collapsed.

Lyondell Basell is a "lesson in chemistry", said John Foley on Breakingviews. Specifically, it's a lesson on what happens when you add leverage to a cyclical company and apply pressure. Like Ineos, the firm expanded fast by rolling up chemical producers spun off from other firms, culminating in Basell paying $19bn for Lyondell in December 2007. These highly leveraged deals worked well at the height of the boom, but now things are falling apart as the recession hits.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.