The US arm of LyondellBasell Industries, the chemicals group that is part of the business empire of Len Blavatnik, the Russian-born oligarch, last night filed for bankruptcy protection in New York. The company has suffered as the recession continues to weaken demand for products made from chemicals.

LyondellBasell said yesterday that one of its European holding companies had also filed for bankruptcy protection and that it arranged for up to $8 billion (£5.4 billion) in financing to keep operating. The private company took on billions of dollars in debt obligations a year ago, when Mr Blavatnik led a $12.7 billion leveraged buyout of Lyondell, an American company, by Basell of the Netherlands.

Volker Trautz, chief executive of LyondellBasell, said the company had seen a dramatic softening in demand and volatile raw materials costs over the past two quarters.

“December was particularly difficult, as many of our customers postponed orders to reduce their inventories,” he said.

Basell Finance, a subsidiary of LyondellBasell Industries, also filed for bankruptcy protection. It said that it had listed assets and debt of more than $1 billion and admitted that it was keeping at bay more than 25,000 creditors. It is believed that the company’s 79 affiliates will also file for court protection.

The filing was made as part of a bankruptcy filing to a New York court yesterday. The chemical company's largest unsecured creditor was the Bank of New York Mellon Corporation which acted as trustee for $615 million in unsecured notes, as well as $241.4 million in unsecured notes in Millennium America, an affiliate.

LyondellBasell's bankers, including Merrill Lynch, Goldman Sachs and Citigroup, have already twice extended the deadline for payment of a $281 million sum. Missing the payment would have put LyondellBasell in technical default at the end of December and force it to seek Chapter 11 bankruptcy protection from its creditors.

The troubles at LyondellBasell, one of the world’s biggest producers of raw plastics, mark a setback for Mr Blavatnik, whose private company, Access Industries, owns a 97 per cent stake.

His problems come after his fellow oligarch and business partner, Oleg Deripaska, had to be rescued by a $4.5 billion loan from the Russian Government in October.

Access has a 5.8 per cent stake in Rusal, the Russian aluminium producer, a holding in TNK-BP, the Anglo-Russian oil joint venture, and a share in Warner Music Group.

UBS and ABN Amro are also included in the lending syndicate, which allowed a payment deadline of December 29 to lapse. A day later, Access Industries turned down a last-minute request for capital by LyondellBasell under a revolving credit facility put in place in March. It is not clear why.

LyondellBasell, which has been hit by the sharp drop in demand for chemicals since October, said that it disagreed with the reason given by Access for its refusal. The group also rejected a claim by Standard & Poor’s, the credit agency, that it was in default of its debt.

Earlier this month Dow Chemical had announced that Kuwait was pulling out of a joint venture because of fears about the state of the chemical industry.

Ineos, the chemicals group and the UK’s biggest private company, has also experienced problems with debts. But last month it renegotiated its loans, giving it some breathing space.

LB in numbers

17,000 LyondellBasell workers

$44bn 2007 revenue

$26bn Estimated debt burden

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