(Bloomberg) -- OQ Chemicals’ loans due this year plunged after its Omani owner ruled out an equity injection, endangering plans to refinance them. 

OQ SAOC, owned by Oman’s government, is instead preparing to hand over control of the Germany-based chemicals firm, according to a person with knowledge of the matter. That led around $1 billion of OQ Chemicals debt to be quoted over 10 cents lower in the low 80s area on Tuesday, other people familiar with the matter said.

The state firm had previously signaled it was prepared to inject as much as €300 million ($323 million) to support the business and allow a debt refinancing, the person said. 

OQ Chemicals is holding a call with lenders on Tuesday. Law firm Freshfields Bruckhaus Deringer and financial adviser Houlihan Lokey had been working on refinancing its outstanding €475 million and $435 million term loans, due in October, people with knowledge of the matter said. Spokespeople for both did not immediately respond to requests for comment.

“The dialogue with lenders is underway,” an OQ Chemicals spokesperson told Bloomberg News. “Day-to-day operations remain unaffected by the current situation. A comprehensive solution is in the interest of all key stakeholders.”

It’s unclear why OQ SAOC decided against an equity injection. Manager Magazin previously reported that an inflow of cash would not be taking place. OQ Chemicals has also explored refinancing the term loans with a direct lender, people said. 

This is not the first time a change of ownership has been on the cards. OQ SAOC previously considered selling the chemicals business at a valuation of around $3 billion, Bloomberg News reported in 2021.

The firm, which has production facilities in Europe, the US and China, was originally bought by OQ SAOC in 2013 from private equity investor Advent International. The company manufactures chemicals used in cosmetics, lubricants, printing inks and flavorings.

Like many in the sector, OQ Chemicals has seen a drop in demand as its customers reduced their inventories, S&P Global Ratings said in a December report. The company has also faced headwinds in recent years from the increase in natural gas prices and the increase in financing costs.

--With assistance from Giulia Morpurgo.

(Adds loan price move in first two graphs.)

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