Item 8.01 Other Events.
Amendments to our Credit Agreements
On October 5, 2020, LyondellBasell Industries N.V. ("LyondellBasell" or "we")
received the required lender consents to make amendments (collectively, the
"Amendments") to our (i) Amended and Restated Credit Agreement, dated June 5,
2014, among LyondellBasell and LYB Americas Finance LLC ("LYB Americas
Finance"), as borrowers, the lenders party thereto, Bank of America, N.A., as
administrative agent, swing line lender and letter of credit issuer, Deutsche
Bank Securities Inc., as syndication agent and the other parties thereto (as
amended, the "Revolving Credit Agreement"), (ii) Three Year Credit Agreement,
dated March 29, 2019, among LyondellBasell, as guarantor, LYB Americas Finance,
as borrower, the lenders party thereto and Bank of America, N.A., as
administrative agent (as amended, the "Term Loan Agreement") and (iii)
Receivables Purchase Agreement, dated September 11, 2012, by and among LYB
Receivables LLC, as seller, Lyondell Chemical Company, as initial servicer,
Mizuho Bank, Ltd., as administrator and letter of credit bank, and certain
conduit purchasers, committed purchasers, letter of credit participants and
purchaser agents that are parties thereto (as amended, the "U.S. Receivables
Facility" and, together with the Revolving Credit Agreement and the Term Loan
Agreement, the "Credit Agreements" and, each a "Credit Agreement"). Among other
things, the Amendments amended each Credit Agreement's maximum leverage ratio
financial covenant to (a) 4.25 to 1.00 for the fiscal quarter ending December
31, 2020; (b) 4.50 to 1.00 for the fiscal quarter ending March 31, 2021; (c)
4.00 to 1.00 for the fiscal quarter ending June 30, 2021; (d) 3.75 to 1.00 for
the fiscal quarter ending September 30, 2021; and (e) 3.50 to 1.00 for the
fiscal quarter ending December 31, 2021 and thereafter; provided, that, to the
extent our recently announced Louisiana joint venture with a subsidiary of Sasol
Limited (the "Louisiana Joint Venture") is consummated, the maximum leverage
ratio financial covenant will automatically adjust to (a) 5.00 to 1.00 for the
fiscal quarters ending December 31, 2020 and March 31,2021; (b) 4.75 to 1.00 for
the fiscal quarter ending June 30, 2021; (c) 4.50 to 1.00 for the fiscal
quarters ending September 30, 2021 and December 31, 2021; (d) 4.00 to 1.00 for
the fiscal quarter ending March 30, 2022; (e) 3.50 to 1.00 for the fiscal
quarter ending June 30, 2022 (or, if the Louisiana Joint Venture is consummated
after December 31, 2020, 4.00 to 1.00); and (f) 3.50 to 1.00 for the fiscal
quarter ending September 30, 2022 and thereafter. In addition, with respect to
the Revolving Credit Agreement and the Term Loan Agreement, the Amendments
further restrict certain dividends and other specified Restricted Payments (as
defined in the Revolving Credit Agreement and Term Loan Agreement).
Other Information
LyondellBasell is providing the disclosure set forth below, in connection with a
registered offering of senior unsecured notes. This information should be read
in conjunction with the risk factors in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019, and Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2020, and the information under the caption
"Cautionary Statement Regarding Forward-Looking Statements" in this Current
Report on Form 8-K.
Recent Developments
Start-Up of New Bora LyondellBasell Joint Venture in China
On September 1, 2020, we announced the establishment and start-up of a new joint
venture polyolefin complex in the Liaoning province of northeastern China and
made an equity contribution of approximately $472 million in connection
therewith. First announced in September 2019, the 50:50 joint venture with
Liaoning Bora Enterprise Group (''Bora'') will operate under the name Bora
LyondellBasell Petrochemical Co. Ltd. (''BLYB''). The BLYB facility includes a
1.1 million metric ton per annum flexible naphtha / LPG cracker and associated
polyethylene production capacity of 800,000 metric tons per annum and 600,000
metric tons per annum of polypropylene. The materials produced at the facility
will be sold for use within China.
Potential Asset Impairment
We evaluate property, plant and equipment for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If it is determined that an asset or asset group's undiscounted
future cash flows will not be sufficient to recover the carrying amount, the
asset is written down to its estimated fair value.
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We expect a prolonged period of reduced demand and compressed margins that will
decrease profitability for transportation fuels made by our Houston refinery.
The lower profitability is a result of the impacts of the COVID-19 pandemic and
associated reductions in mobility affecting the global economy. In addition, the
refinery is expected to continue to be adversely affected by reduced supply and
lower discounts for the heavy crude oil feedstocks that we utilize. Due to these
trends, in the course of preparing our financial results for the quarter ended
September 30, 2020, we are in the process of assessing our Houston refinery's
property, plant and equipment for possible impairment. The impairment analysis
is being prepared by management based upon certain expectations including future
commodity prices, margins on refined products and operating rates and capital
expenditures, each of which remain subject to further refinement.
We expect that following this assessment, we will recognize a non-cash
impairment charge in the third quarter of 2020. The current book value of the
Houston refinery's property, plant and equipment is approximately $1.1 billion.
While we have not completed our determination of the amount of any impairment,
we do not expect it to result in any material future cash expenditures. The
determination regarding the amount of any impairment is not expected to be known
until our financial statements for the quarter ended September 30, 2020 are
finalized.
Risk Factor
We may be required to record material charges against our earnings due to any
number of events that could cause us to impair our assets.
We may be required to reduce production or idle facilities for extended periods
of time or exit certain businesses as a result of the cyclical nature of our
industry. Specifically, oversupplies of or lack of demand for particular
products or high raw material prices may cause us to reduce production. We may
choose to reduce production at certain facilities because we have off-take
arrangements at other facilities, which make any reductions or idling
unavailable at those facilities. We routinely monitor these and other indicators
that may lead us to test our assets for impairment, which results in a charge to
earnings. Any decision to permanently close facilities or exit a business may
also result in impairment or other charges to earnings.
Temporary outages or reduced production at our facilities can last for several
quarters and sometimes longer. These outages could cause us to incur significant
costs, including the expenses of maintaining and restarting these facilities. In
addition, even though we may reduce production at facilities, we may be required
to continue to purchase or pay for utilities or raw materials under take-or-pay
supply agreements.
Events surrounding the ongoing COVID-19 pandemic continue to depress demand for
some of our products, including extended loss of demand and resulting pricing
pressures for transportation fuels made by our Houston refinery. Lower refining
and marketing margins may reduce the amount of refined products we produce,
which may reduce our revenues, income from operations and cash flows.
Significant and sustained reductions in refining and marketing gross margins
could require us to further reduce our capital expenditures, or impair the
carrying value of our assets (such as property, plant and equipment or
inventory). For example, we expect to recognize a non-cash impairment charge in
the third quarter of 2020 related our Houston refinery. If conditions that
contributed to this impairment worsen or impact other assets, we may incur
additional non-cash impairments and such impairments may be material to our
results of operations.
Cautionary Statement Regarding Forward-Looking Statements
The statements in this Current Report on Form 8-K relating to matters that are
not historical facts are forward-looking statements. These forward-looking
statements are based upon assumptions of management of LyondellBasell which are
believed to be reasonable at the time made and are subject to significant risks
and uncertainties. When used in this Current Report on Form 8-K, the words
"estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will," "expect," and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. The statements in
this Current Report on Form 8-K relating to matters that are not historical
facts are forward-looking statements. In particular, statements, express or
implied, concerning future actions, conditions or events, future operating
results, impairment charges or the ability to generate revenues, income or cash
flow or to pay dividends are forward-looking statements. Actual results could
differ materially based on factors including, but not limited to, market
conditions, the results of any repayment or redemption of indebtedness, the
business cyclicality of the chemical, polymers and refining industries; the
availability, cost and price volatility of raw materials and utilities,
particularly the cost of oil, natural gas, and associated natural gas liquids;
our ability to complete the transactions described herein, including the
Louisiana Joint Venture, and the timing of such transactions; the receipt of all
required governmental and
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shareholder approvals for such transactions; our ability to achieve expected
synergies from such transactions; the completion of the acquisition of joint
venture assets in the future and ability to recognize the anticipated benefits
thereof; uncertainties related to the extent and duration of the
pandemic-related decline in demand, or other impacts due to the COVID-19
pandemic in geographic regions or markets served by us, or where our operations
are located, including the risk of prolonged recession; future financial and
operating results; risks and uncertainties posed by international operations,
including foreign currency fluctuations; and our ability to comply with debt
covenants and to amend, extend, repay, service, and reduce our debt. .
Additional factors that could cause results to differ materially from those
described in the forward-looking statements can be found in the "Risk Factors"
sections of our Form 10-K for the year ended December 31, 2019, and our Form
10-Q for the quarter ended March 31, 2020, which can be found at
www.LyondellBasell.com on the Investor Relations page and on the Securities and
Exchange Commission's website at www.sec.gov. There is no assurance that any of
the actions, events or results of the forward-looking statements will occur, or
if any of them do, what impact they will have on our results of operations or
financial condition. Forward-looking statements speak only as of the date they
were made and are based on the estimates and opinions of management of
LyondellBasell at the time the statements are made. LyondellBasell does not
assume any obligation to update forward-looking statements should circumstances
or management's estimates or opinions change, except as required by law.
This Current Report on Form 8-K does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any offer,
solicitation or sale any securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction.
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