Flavours and fragrances supplier LyondellBasell Chemical has filed for bankruptcy protection citing waning demand for its products.
In a statement, the company said its US operations and one of its European holding companies had voluntarily filed to reorganise under Chapter 11 of the US Bankruptcy Code to facilitate a restructuring of its debts.
Bloomberg reported that the Houston-based business had assets of $27.1 billion, debt of more than $19.4 billion and more than 25,000 creditors, according to a petition filed in the US Bankruptcy Court in Manhattan.
Volker Trautz, LyondellBassell Chemical CEO, said: "During the past two quarters, we have seen a dramatic softening in demand for our products and unprecedented volatility in raw materials costs. December was particularly difficult, as many of our customers postponed orders to reduce their inventories.
"Though we currently anticipate this situation to be short-term and expect customers to increase their purchasing in 2009, we made the decision to file Chapter 11 in order to provide the company with the time and resources necessary to facilitate an orderly restructuring and position the business for the long term.
Trautz said the company had begun taking steps to control costs as demand weakened and raw material costs started to fluctuate.
"Over the past several months, we announced plans to significantly reduce headcount and also reduced capital expenditures and working capital," he said. "We have also idled certain facilities and reduced production and processing at others. We are aggressively exploring additional ways to lower our costs and streamline operations in response to a very difficult global economic environment."
He added: "Our core businesses — fuels, chemicals, plastics and technology — are fundamental to the global economy."
LyondellBasell was created in December 2007 by the $12.7 billion acquisition of Lyondell Chemical and affiliate Equistar Chemicals LP by Dutch chemicals company Basell AF SCA. The combination created one of the world's largest independent chemical producers with 16,000 employees and sales of $54.6 billion.
Kantha Shelke, co-president of Chicago-based food and nutrition think tank Corvus Blue, said LyondellBasell's decision to file for protection could ultimately leave it stronger.
"I believe that the cries in the marketplace about LyondellBasell's demise are rather exaggerated. It is probably taking the opportunity to correct course and refine its business model — as any enterprise should during this economic downturn.
"The business relies largely on manufacturers who have been forced to trim production by consumers who have resorted to frugal lifestyles. Slim spending is a strong motivator for companies like LyondellBasell to start preparing for the other side of the valley and to get back on a sensible commercially viable plan."
Other companies in the ingredients sector should take a similarly forward-looking view, she added. "For companies like LyondellBasell and its customers, the present is ideal to clean up and reorganise to allow for innovation. Smart companies are seeing plenty of opportunities as buying power builds for a better time ahead."