In the past five years, LyondellBasell’s (LYB) debt has been on an upward trend. LYB’s debt has grown at a CAGR (compound annual growth rate) of 17.6% since 2011. LyondellBasell’s debt has risen from $4.0 billion in 2011 to $9.0 billion at the end of 2016. The debt we have defined here includes long-term borrowings, credit facility borrowings, and long-term borrowings due within one year.
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On February 21, 2017, LyondellBasell’s wholly owned subsidiary, LYB International Finance, priced its public offering of $1 billion aggregate principal amount in 3.5% guaranteed notes due in 2027. The notes were fully and unconditionally guaranteed by LyondellBasell. The offer was closed on March 2, 2017, subject to customary closing conditions. The proceeds received from the new offering are expected to redeem $1 billion aggregate principal amount of LyondellBasell’s 5.0% senior notes due in 2019. This will help LYB to reduce its interest expense going forward.
Even with this new borrowing, there won’t be any changes to LYB’s debt position, as it intends to pay off the existing debt for the same amount.
Investors can invest indirectly in LyondellBasell by investing in the Guggenheim S&P 500 Equal Weight Materials ETF (RTM), which invests 4.1% of its portfolio in LyondellBasell as of March 3, 2017. In the next part, we’ll analyze LYB’s debt-to-equity ratio.