It's been brutal for the chemicals industry. Dow Chemical (NYSE: DOW), for example, lost a multi-billion dollar joint venture deal with Kuwait. Then there was the implosion of the Huntsman (NYSE: HUN) buyout, which singed private equity operator, Apollo Management LP.

Now, there's another victim: Lyondell Chemical. The company, which is part of the LyondellBasell Industries AF empire, filed for bankruptcy.

Lyondell Chemical, a maker of polymers and petrochemicals, couldn't manage the price deflation as well as harsh materials costs. Although, the main problem was a $12.7 billion merger in 2007, which resulted in large amounts of debt.

Of course, the subprime crisis is a key element of the credit crunch. But there has also been another force: the huge build up of leveraged loans for mega buyouts.

Well, with the help of sovereign wealth funds -- and even some private equity firms, like TPG -- the subprime problem appears to be improving. And, interestingly enough, it looks like banks are also effectively dealing with the leverage loan overhang. This according to a piece in FinancialNews.com.

Basically, the backlog is now at $91 billion (which is a drop of nearly 60% so far this year). But we are already seeing signs that banks are opening up to new loans, such as with Basell's buyout of Lyondell Chemical Company. The major banks need the deal flow from private equity firms because of the juicy fees. So it's no surprise that we've seen a lot of action in getting things moving again.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

EI DuPont de Nemours & Co. (NYSE:DD) opened at $50.60. So far today the stock has hit a low of $50.51 and a high of $51.40. As of 11:15 this morning, DD is trading at $51.00, up $0.99 (2.0%).

After hitting a one year high of $53.67 in February, the stock dropped with the rest of the market in the recent sell off, but found support just below $50. Rumors abound this morning that companies in this industry are attractive takeover targets, with Dow Chemical (NYSE:DOW), Lyondell Chemical (NYSE:LYO), and DuPont the beneficiaries of the buzz. The technical indicators for DD have been bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $45 range. DD hasn't been below $45 since October and has shown support around $49. This trade could be risky if oil futures get back to post-Katrina levels, but in hindsight, it looks like the highest crude prices were caused by speculators, and oil has seen some resistance just over $60 per barrel recently.

Brent Archer is an options analyst and writer at Investors Observer (Free Subscription).

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.