RIL may buy LyondellBasell

Reliance Industries Ltd (RIL) may buy bankrupt LyondellBasell, one of the world's largest polymers, petrochemicals and fuels companies at distress valuations, according to sources. Its sale of treasury shares on Thursday indicates the management intends to make large investments.

The Netherlands-based LyondellBasell had combined revenues of $50.7 billion (Rs 250,000 crore) in 2008, compared with $30 billion (Rs 150,000 crore) for RIL. The company, which had $27 billion in assets and $19 billion in debt, filed for Chapter 11 under the US Bankruptcy Code on January 6 this year. The US bankruptcy court for the southern district of New York is overseeing the restructuring and reorganisation process.

Bank of America-Merrill Lynch, Royal Bank of Scotland and Citigroup are among the lenders to the company, which obtained debtor-in-possession financing of $8.1 billion in February this year. LyondellBasell is now offering a partial exit to these bank lenders by offering equity through a rights issue, which is expected to hit the market in October. Lenders may get into a pre-offer arrangement under which RIL will pick up some of the forfeited rights and directly pay the lenders for the stake. This would entail a minimum payment of $3.25 billion or Rs 15,000 crore to the lenders, according to sources.

LyondellBassell does not have feedstock sources of its own: it buys propylene, the feedstock, from Shell or Hoechst. RIL produces about 1.8 million tonnes of propylene per annum in Jamnagar. If there is no feedstock linkage, buying does not make any sense. LyondellBasell has over 60 manufacturing facilies spread across 19 countries.