margin is set to increase by a further 0.5 percentage points every three months starting in June. The interim loan rolls over into permanent financing in December if the loan is not repaid by then.

LyondellBasell has built a financing structure able to withstand tough conditions, Bigman says. “One of the key things is making sure we have flexibility to deal with the different scenarios and the ability to weather the unexpected,” he says. “We believe that has been built in.” The current capital structure and leverage ratios are more sound than when Access initially purchased Basell two years ago, he adds. “The leverage we have now is quite reasonable,” Bigman says.

The combined company generated pro forma Ebitda of $5.1 billion in the 12-month period ended September 30, 2007, and has targeted $420 million in cost savings and revenue enhancements during the next few years. Excess cash will be dedicated to debt reduction, and the company says it will remain disciplined on capital expenditures targeting maintenance of existing assets and growth opportunities in developing markets or where it can leverage technology advantages. The company also maintains the flexibility to pursue targeted acquisitions including the $133-million acquisition of Solvay’s North American PP compounds business, a deal that closed in February.

Management focus for now is on integration. “We are focused on making this merger a success,” Trautz says. Lyondell’s lineage includes Arco Chemical, Millennium Chemical, and parts of OxyChem. Basell’s includes parts of BASF, Shell Chemical, Hoechst, ICI, Montecatini, and Hercules. “The lessons and management from previous deals are still around,” he says.

Clear targets and goals will help the company achieve objectives, Bigman says. “The quickest way to get integration is to have people working toward common goals,” he says. “When there’s a job to get done, people find a way to get over differences quickly.”

One advantage to the merger is that each company had already taken steps to improve the efficiency and competitiveness of its asset base. “Both companies have been through a very detailed clearing and cleaning process over the past couple of years,” Trautz says. “Fortunately, most of the [asset optimiza-tion] work has already been done.”

Earnings and cash flow should remain relatively strong in 2008, which will help pay down debt. “We don’t foresee a big change in the operating environment this year com-

pared with last year,” Trautz says. “Mideast projects are being delayed,” which has helped earnings in olefins and derivatives, and polyolefins, he says. “On the negative side is weaker prospects for economic development worldwide. GDP will probably be a bit slower than a year ago.” LyondellBasell’s broader product line should hedge against earnings volatility, the company says. “The economic cycle in fuels is different than for C₂s and C₃s,” Trautz says. “Petrochemical and fuel cycles do not run in parallel.” PO, acetyls, advanced polyolefins, and technology licensing also differ from the overall petchem cycle and provide diversified earnings streams for the company, he adds. Standard & Poor’s (S&P; New York) revised its outlook on LyondellBasell to negative from stable last week, maintaining the ‘B+’ long-term corporate credit rating. The revision reflects weaker economic growth in Europe and the U.S. and a significant increase in oil prices, S&P says. “We expect LyondellBasell to achieve significantly lower profitability in 2008, leading to only modest debt reduction,” says S&P credit analyst Tobias Mock. “This would prevent the company from creating a financial cushion ahead of the expected downturn in the petrochemicals industry in 2009.” Debt-to-Ebitda ratio may fall below 5 times by year-end, Mock says. “We also expect the petrochemical cycle to weaken from 2009, due to new capacities in the Middle East and Asia, putting pressure on selling prices of key petrochemicals and polyolefins.” The broader product and technology

Trautz: Lyondell was always the ‘preferred’ partner.