NEW YORK (AP) - LyondellBasell Industries AF, the world's third-largest independent chemical company, said Wednesday bankruptcy protection is an option as a broadening recession reduces demand for its products.

"We are looking to restructure our debt, and we are looking at all of our options," company spokeswoman Susan Moore said in an interview. "Filing for Chapter 11 protection is one of those options."

The privately held company is working with banks "to find the most efficient way to restructure" and has hired advisers, she added. The company was formed in 2007 when Dutch chemical company Basell International Holdings paid $12.7 billion for Houston-based Lyondell Chemical.

Netherlands-based LyondellBasell was downgraded Tuesday by credit ratings agencies Standard & Poor's and Moody's. It is the latest major chemical producer to stumble because of volatile energy prices.

Earlier this month the company said in a filing with the Securities and Exchange Commission that several lenders have allowed it to postpone $160 million in loan payments. That led S&P to cut its long-term corporate credit rating to "SD," or "selective default," from "B-," a junk rating.

S&P said a restructuring of the company's "complex multitiered" debt could lead to "substantial principal losses for some creditors, especially nonsenior lenders, which will be tantamount to a default under our criteria and definition."

Moody's lowered its corporate family rating on LyondellBasell to "Caa2," its fourth-worst junk rating, from "B3."

"A challenging operating environment in the current quarter and likely sustained weakness in demand at the beginning of the year will likely further restrict the headroom under some of the company's financial covenants," Moody's said.

Yet LyondellBasell stressed it is "not currently in default according to its agreements with its lenders."

"Standard & Poor's definition of 'selected default' related to our corporate credit rating should not be misinterpreted to suggest that LyondellBasell is currently in default of its bank agreements," the company said in a Tuesday statement.

The Lyondell buyout in 2007 came just as crude oil began a rapid ascent to nearly $150 per barrel, prices that substantially squeezed margins. But even as costs for oil and other commodities have dropped sharply, LyondellBasell and its peers are facing a substantial decline in consumer demand amid the global economic recession.

Other members of the chemical sector have also been hit hard by the volatile commodity prices and the economic recession.

Midland, Mich.-based Dow Chemical Co. laid off 5,000 workers and closed 20 plants in December, and on Sunday a Kuwait state-owned company pulled out of a $17.4 billion joint venture with the U.S. company. That surprise move has left the nation's largest chemical company scrambling to salvage its buyout of Philadelphia-based rival Rohm & Haas Co.

Wilmington, Del.-based DuPont Co. let 2,500 workers go in December and released 4,000 contractors.

Salt Lake City-based Huntsman Corp. ended its $6.5 billion agreement to be taken private by Columbus, Ohio-based Hexion Specialty Chemicals Inc. and agreed to a $1 billion legal settlement with Hexion's private-equity owner, Apollo Global Management LP. The deal had unraveled amid the global credit crisis and sparked a string of lawsuits.

Covington, Ky.-based Ashland Inc., maker of Valvoline lubricants, slashed its dividend 73 percent after paying $2.4 billion - including $700 million in debt - for Hercules Inc. Since the deal closed Nov. 13, Ashland's stock has dropped 42 percent.