The Global Manufacturer

Is a Debt Tsunami Headed for the Chemicals Industry?

Debt of approximately $380 billion will drive a wave of consolidation in the chemical industry, according to a study of more than 200 companies from A.T. Kearney.

From 2006 to 2008, the chemicals industry conducted deals worth $330 billion. The majority of the deals were valued at more than $5 billion. Debt repayment will be concentrated over a period from 2013 to 2016, A.T. Kearney notes, with payments peaking at $33 billion in 2016.

These debts come at the same time that industry firms are seeking financing to build up to 10 world-scale cracker and derivative plants to cash in on the U.S. shale gas boom.

“The original lenders in this sector have suffered through painful write-downs with companies such as LyondellBasell and INEOS,” the study states. “As a result, industry consolidation is inevitable as lenders and the industry move to strengthen companies prior to refinancing.”

Who stands to gain in the coming round of consolidations? A.T. Kearney says companies from Asia and the Middle East will use the opportunity to acquire or merge with established western chemical companies.

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