Lyondell ready to pay down debt next year if cycle improves, but prepared for continued trough

By Peter Heap

New York, Sept. 16 - Lyondell Chemical Co. said it is ready to pay down debt as early as next year if business conditions pick up in its markets - but has a debt structure in place that means it is also ready if the upturn does not materialize.

The Houston chemical company's financial strategy remains unchanged, Kevin DeNicola, senior vice president and chief financial officer, told the Credit Suisse First Boston chemical conference Tuesday.

Specifically, Lyondell aims to maintain sufficient liquidity and repay debt.

Lyondell's financing actions have aimed to extend maturities through active management while including the flexibility to repay debt earlier if it has cash available, DeNicola told the conference.

As a result, the company and its Equistar part-owned subsidiary have only small maturities through 2006.

At the same time around $1.5 billion of Lyondell debt is prepayable in 2004 and a further big chunk in 2005.

The strategy for debt maturities has been to "move them out just in case the cycle does not change. If the cycle doesn't change we have got a couple of years left before we hit the maturities," DeNicola said.

Meanwhile, Lyondell has paid up for prepayment options. And DeNicola said: "It's well worth us paying more to get the flexibility because that's our objective - to pay down debt.

"As early as 2004 we could start paying down debt."

As far the outlook for conditions improving in the chemical industry, DeNicola commented: "The fundamentals are good in this business.

"It doesn't take a very big change from where we are -primarily on the demand side - for these things to kick in," he added, referring to the additional amounts of cash flow that Lyondell would generate.

But while "we are optimistic," he also cautioned that forecasting is difficult in the sector.

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