Borden Chemicals and Plastics files for Chapter 11

Borden Chemicals and Plastics Operating Limited Partnership (BCP, Geismar, LA) and its subsidiary, BCP Finance Corp. have voluntarily filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.

The company, which produces polyvinyl chloride (PVC) resins, was exploring potential mergers, joint ventures, or asset sales during the past few months and will continue to do so under its Chapter 11 reorganization.

"Unfortunately, at the present time it appears unlikely that holders of BCPLP's publicly traded units would receive any distribution in connection with such a transaction or that the units would have any value following resolution of the Chapter 11 process," says BCPM president/CEO Mark J. Schneider says the company

The Chapter 11 petition does not include BCP Management, Inc. (BCPM), the general partner of BCP or Borden Chemicals and Plastics LP (BCPLP), the limited partner of BCP. Nor do the filings relate to two other distinct companies, Borden, Inc., and its subsidiary, Borden Chemical, Inc.

The company chose to pursue Chapter 11 after being squeezed between rapidly rising natural gas costs and depressed resin demand and prices. It says this created a critical debt and liquidity situation.

BCP expects to continue operating normally during the anticipated reorganization process.

"BCP, with an estimated 9% of the North American PVC market, remains a focused PVC player in an industry that, we believe, will recover and have long-term growth prospects,'' says Schneider.

BCP is seeking bankruptcy court approval of a $100 million debtor-in-possession (DIP) credit facility with up to $20 million of new availability from a group of lenders led by Fleet Capital Corp. BCP plans to use the loan to pay employees and vendors and to support ongoing operations and other working capital needs.

"During the reorganization period, BCP intends to maintain its current operations and will strive to continue to satisfy customers," says Schneider. "We intend to fulfill our commitment to our employees, taking the steps necessary to ensure that they continue receiving their compensation as usual while we operate under court protection."

Schneider said BCP had recently taken a number of steps, beginning last year, in an effort to help offset a depressed PVC market and generally worsened economic conditions. These included:

• Reducing BCP's exposure to foreign competition and domestic raw materials by exiting non-PVC operations through the sale of formaldehyde assets in July, 2000 and the shut down of methanol and nitrogen operations on January 1, 2001.
• Finalizing a company-wide internal restructuring with projected annualized savings of approximately $5 million.
• Targeting discretionary general and administrative spending for reduction by several million dollars.

"While we had hoped for a modest improvement in resin demand and prices, the extent of the recovery has been slower than we anticipated and remains highly dependent on general economic conditions, which continue to be poor," says Schneider.

"The outlook for natural gas prices continues to be volatile and strongly influences BCP's energy and raw material costs, even after the reduction of gas consumption to the level required to supply only basic energy needs of the facilities. Like other PVC producers, BCP has been hampered by dramatic increases in natural gas prices that climbed steadily through January 2001, and have only moderated slightly since then."

BCP produces PVC resins at its facilities in Geismar, LA. And has other PVC operations in Addis, La., and Illiopolis, Ill.

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