Shocking news: Repay gap of Chemical companies will lead to global sector restructuring
This comes at the same time while increased US shale gas is leading industry players to seek project financing up to 10 world scale cracker and derivate plants
A.T. Kearney analysed more than 200 companies, both public and private, spanning different industry sectors in all regions. These companies have debt of roughly USD 380 billion, with the top 27 most indebted companies with revenues of more than USD one billion globally, having a debt v9olume of roughly 170 billion and thereof USD 140 billion become mature over a five years time.
Measured against the period from 2000 – 2005, the debt build-up that occurred in the chemicals industry from 2006 to 2008 has been extraordinary. The industry conducted deals worth more than USD 330 billion, with the majority of deals valued more than USD 5 billion. One result is that debt repayment is concentrated over the next few years, with levels of USD 22 billion to USD 26 billion through 2014, leading to a peak of USD 33 billion due in 2016.
Many of the original lenders in the sector have suffered through painful write-downs over the last few years, and as a result, industry consolidation is inevitable as lenders and the industry move to strengthen companies prior to refinancing. These developments are likely to open up opportunities for new entrants and companies from Asia and the Middle East to acquire or merge with western chemical companies.
Co-author of the study and partner at A.T. Kearney, Andy Walberer stated: “The landscape for deal in the chemicals industry is shifting. As the industry debt situation reaches an important stretch with a wave of repayments due, financing capability will become an important M&A driver, both for sellers and buyers. That trend, combined with shale gas driven investment and strategies, will create new catalysts for deals in the chemical sector in the coming years.”