It doesn’t look like 2009 is going to be a happy new year for the chemicals sector.

LyondellBasell Industries, the world’s third-largest independent chemicals company, has told lenders it is considering filing for bankruptcy protection amid plunging sales and a cash crunch, the Wall Street Journal said, citing people familiar with the matter.

The company is one of several in the sector facing one of the worst slumps ever in chemical demand. The industry has been battered by high price tags on crude oil and natural gas, which are key components of plastics and other chemicals.  Energy prices have plunged in recent months, but demand has also been hurt by recessions in most developed countries and a sharp slowdown in emerging economies.

Profits of U.S. chemical makers, in recent quarters, have been buoyed by strong demand from developing economies but the global financil crisis is hurting international results now. And Wall Street has trimmed its 2009 expectations for the sector, expecting weaker demand next year.

LyondellBasell, which is based in the Netherlands and has large U.S. operations, has hired bankruptcy counsel and told lenders it is trying to line up as much as $2 billion in bankruptcy financing, these people say. A Chapter 11 filing may be imminent, the report said.

2009 isn’t looking good for Dow Chemicals either, the largest U.S. chemical maker. The company, which earlier this month said it would close 20 facilities, divest several businesses and cut 5,000 jobs, is now facing the possiiblity of having to twist rival Rohm & Haas’ arm to renegotiate its $15.3 billion takeover of the specialty chemicals company.

That deal is now in question, after Kuwait scrapped a $17.4 billion joint venture whose proceeds Dow had planned to use to pay down some of the resulting debt from the acquisition. But experts say the terms of the deal leave Dow with very limited recourse.

But hope springs eternal.  With oil prices showing signs of receding and global economies getting trillions of dollars from their governments, let’s hope that 2009 ends on a better note than 2008 did. At least for the chemicals sector.

DEALS OF THE DAY

** Indian oil company ONGC said it will proceed with its 1.3 billion pounds ($1.89 billion) takeover of UK-listed Imperial Energy, to the relief of Imperial investors who feared ONGC would back out of the high-priced deal. 

** The Pininfarina family is set to sell out of its company, the designer of iconic cars for films and Ferrari, in a deal which will help the group handle its nearly 600 million euros debt.  
    
** Sumitomo Mitsui Financial Group, Japan’s third-largest bank, bought a small stake in South Korea’s KB Financial Group for about $46 million from KB’s banking arm Kookmin, Kookmin said.

(Photo, of a passer-by walking past an entrance in the shape of “2009″ in front of shopping mall in Shanghai, by Reuters)

American Greetings evidently found the perfect way to smoothe over a tiff.

Recycled Paper Greetings agreed to be bought by the second-largest U.S. greeting card maker, which was attracted to the smaller rival’s “witty, funny and fresh content.”

The agreement comes after a spat in September, when American Greetings said on an earnings conference call that it had bought $44 million of distressed RPG debt.

RPG Chief Executive Jude Rake said in a statement at the time that he was taken by surprise by the announcement, and called the actions of the larger rival “predatory.” RPG said it had even filed a lawsuit against American Greetings earlier.

Rake has since changed his mind. “This acquisition is good news for our company on many fronts,” he said in a statement announcing the deal.

So how did American Greetings change Recycled Paper’s mind? Maybe they sent their rival a nice card.

A company in the U.S. auto industry fails — and the government steps in as savior. Yet again. That’s right. Santa visits the automakers this year while the Grinch steals taxpayers’ Christmas.

The Bush administration is buying $5 billion in equity in GMAC – the finance arm owned by GM and Cerberus Capital Management. The Treasury has also offered a new $1 billion loan to GM so the automaker could participate in a rights offering at GMAC.

Yes, this in addition to the recent $17.4 billion emergency loan to save GM and Chrysler from bankruptcy.  In fact, the government already helped GMAC last week, when the Federal Reserve approved the finance company’s application to become a bank-holding company.

But the Fed’s approval was conditional on GMAC raising new capital.

GMAC said it had raised enough capital to satisfy the Fed’s conditions just as the Treasury announcement on Monday.

The Treasury’s generous moves help Cerberus just as much as they help the auto industry. Cerberus bought 51 percent of GMAC in 2006 and 80 percent of Chrylser last year. The private equity firm has been stung by both those investments as U.S. auto sales have plunged to record lows amid a sinking economy following its purchases.

A happy coincidence: Cerberus Chairman John Snow was the Bush administration’s treasury secretary before Henry Paulson.

The GMAC loans, as well as the original $17.4 billion in aid, come from a program within the Troubled Asset Relief Program to make investments directed at the auto industry. A Treasury official told the Wall Street Journal the new program did not have a specific dollar limit. Now there’s a scary thought.

DEALS OF THE DAY

** China’s three leading steel mills agreed to merge into one entity via share swaps which will create the country’s largest listed steelmaker and further speed industry consolidation. 
       
** Suzlon Energy Ltd, the world’s fifth largest wind turbine maker, said it had raised its stake in Germany’s REpower to 73.71 percent by paying Portugal’s Martifer 65 million euros ($91.98 million). 

** Nationwide Mutual Insurance Co will go ahead with the buyout of its unit Nationwide Financial Services Inc at a price struck months before life insurers were hammered by the market turmoil, the Wall Street Journal said. 

** PCCW’s financial advisers said the takeover offer for the company had been raised to HK$4.50 per share from HK$4.20, in a move aimed at prompting minority shareholders’ support for the buyout.

Kuwait’s decision to walk away from a $17.4 billion joint venture with Dow Chemical could hurt the prospects for the company’s $15.3 billion takeover of Rohm & Haas. But there could be other losers, too.

According to Thomson Reuters, Citigroup and Merrill Lynch advised Dow on the Kuwaiti deal and could lose some fees now that it has been scuttled. Those banks, as well as Morgan Stanley, advised the chemical company on the Rohm and Haas deal, and could drop some more fees if that deal is renegotiated or terminated.

The three firms also lead the group of 19 banks behind the $13 billion term loan that Dow took out to finance the takeover. Leading the loan are Citi, Merrill and Morgan Stanley, which have each committed $1.35 billion.

Others who could take a hit include Goldman Sachs, who advised Rohm and Haas, and Lazard, who advised the Haas family trust, in the Dow deal.