SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|X|QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2001

Commission File No. 1-9699

BORDEN CHEMICALS AND PLASTICS
LIMITED PARTNERSHIP

Delaware 31-1269627
----------------------- ----------------------------------
(State of organization) (I.R.S. Employer Identification No.)

Highway 73, Geismar, Louisiana 70734 614-225-4482
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Registrant's telephone number)

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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X .

----------

Number of Common Units outstanding as of the close of business on
March 25, 2002: 36,750,000.

================================================================================

Part I. Financial Information

Item 1. Financial Statements
- -----------------------------

BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per Unit data)

Three Months Ended
--------------------------------------------

June 30, June 30,
2001 2000
---------- --------

Revenues
Net trade sales .......................................... $ - $133,526
Net sales to related parties ............................. - 6,181
---------- --------

Total revenues ..................................... - 139,707
---------- --------

Expenses
Cost of goods sold
Trade .............................................. - 111,739
Related parties .................................... - 4,887
Marketing, general & administrative expense .............. - 6,417
Bad Debt expense ......................................... 6,933 -
Interest expense ......................................... 50 7,235
Tax on gross margin ...................................... - 710
Equity on loss of unconsolidated subsidiaries ............ - -
Equity on loss of affiliate .............................. - 233
Other (income) expense including minority interest ....... - (152)
---------- --------
Total expenses ................................ 6,983 131,069
---------- --------

Net income (loss) .......................................... (6,983) 8,638
========== ========

Discontinued operations
Loss from discontinued operations, net ................. - (5,589)
Gain on disposal of discontinued operations ............ - 5,012
---------- --------

Net (loss) income ........................................ (6,983) 8,061
Less 1% General Partner interest .................... (70) (80)
---------- --------
Net (loss) income applicable to Limited
Partners' interest .................................. $ (6,913) $ 7,981
========== ========

Per Unit data-basic and diluted, net of 1% General Partner interest
(Loss) income from continuing operations per Unit .......... $ (0.19) $ 0.23
Loss from discontinued operations per Unit ................. 0.00 (0.02)
---------- --------
Net (loss) income per Unit ................................. $ (0.19) $ 0.21
========== ========

Average number of Units outstanding during the period .... 36,750 36,750
========== ========

Cash distributions declared per Unit ..................... $ 0.00 $ 0.00
========== ========

See Notes to Consolidated Condensed Financial Statements.

BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per Unit data)

Six Months Ended
------------------------------

June 30, June 30,
2001 2000
--------- ---------

Revenues
Net trade sales ........................................... $ - $ 267,931
Net sales to related parties .............................. - 12,254
--------- ---------

Total revenues ...................................... - 280,185
--------- ---------

Expenses
Cost of goods sold
Trade ............................................... - 226,581
Related parties ..................................... - 9,923
Marketing, general & administrative expense ............... - 13,559
Bad debt expense .......................................... 6,933 -
Interest expense .......................................... 50 14,698
Tax on gross margin ....................................... - 1,460
Equity on loss of unconsolidated subsidiaries ............. 19,091 -
Equity on loss of affiliate ............................... - 493
Other (income) expense including minority interest ........ - (141)
--------- ---------

Total expenses ................................. 26,074 266,573
--------- ---------

Net income (loss) from continuing operations ................ (26,074) 13,612
========= =========

Discontinued operations
Loss from discontinued operations, net .................. - (10,192)
Gain on disposal of discontinued operations ............. - 5,012
--------- ---------

Net (loss) income ......................................... (26,074) 8,432
Less 1% General Partner interest ..................... (261) (84)
--------- ---------
Net income (loss) applicable to Limited
Partners' interest ................................... $ (25,813) $ 8,348
========= =========

Per Unit data, basic and diluted, net of 1% General Partner interest
Income (Loss) from continuing operations per Unit ........... $ (0.70) 0.37
Income (Loss) from discontinued operations per Unit ........ 0.00 (0.14)
--------- ---------
Net (loss) income per Unit .................................. $ (0.70) $ 0.23
========= =========

Average number of Units outstanding during the period ..... 36,750 36,750
========= =========

Cash distributions declared per Unit ...................... $ 0.00 $ 0.00
========= =========

See Notes to Consolidated Condensed Financial Statements.

BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Six Months Ended
----------------
June 30, June 30,
2001 2000
---------- -----------

Cash Flows From Operations
Net income (loss) ...................................................................... $ (26,074) $ 8,432
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Gain on disposal of discontinued operations, net ................................. - (5,012)
Equity in loss of unconsolidated subsidiaries .................................... 19,091 -
Bad debt expense ................................................................. 6,933 -
Depreciation ..................................................................... - 19,311
Increase (decrease) in certain assets and liabilities:
Change in receivables ............................................................ - (7,071)
Change in inventory .............................................................. - (4,985)
Change in accounts payable ....................................................... - (13,221)
Other ............................................................................ 50 (3,001)
--------- ---------
Net cash flows used by operating activities ......................................... - (5,547)
--------- ---------

Cash Flows From Investing Activities
Capital expenditures ............................................................. - (4,586)
Plant acquisition ................................................................ - (8,177)
--------- ---------
Net cash flows provided (used) by investing activities .............................. - (12,763)
--------- ---------

Cash Flows From Financing Activities
Gross borrowings under line-of-credit agreement ............................... - 162,830
Gross repayments under line-of-credit agreement ............................... - (139,779)
Payment of debt issuance costs ............................................... - (1,113)
--------- ---------
Net cash flows provided (used) by financing activities .............................. - 21,938
--------- ---------

Change in cash and equivalents ........................................................... - 3,628

Cash and equivalents at beginning of period .............................................. - 5,759
--------- ---------

Cash and equivalents at end of period .................................................... $ - $ 9,387
========= =========

Supplemental Disclosures of Cash Flow Information

Issuance of note payable in exchange for payment of gross margin tax ..................... $ 2,800 $ -
========= =========

See Notes to Consolidated Condensed Financial Statements

BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)

(Unaudited)
ASSETS June 30, 2001 December 31, 2000
- ------ ------------- -----------------

Current assets
Cash and equivalents ................................................................ $ - $ 3,223
Accounts receivable (less allowance for doubtful accounts of $0
and $1,843 respectively)
Trade ........................................................................... - 58,444
Related parties ................................................................. - 22,328
Inventories
Finished and in process goods ................................................... - 44,024
Raw materials and supplies ...................................................... - 12,964
Receivable from unconsolidated subsidiary (see Note 7) .............................. - -
Prepaid expenses and other current assets ........................................... - 15,907
--------- ---------
Total current assets ............................................................ - 156,890
--------- ---------
Other assets
Investments in and advances to affiliated companies .................................... - 4,124
Other assets ........................................................................... - 37,408
--------- ---------
Total other assets ........................................................... - 41,532
--------- ---------

Plant, property and equipment ............................................................ - 486,410
Less accumulated depreciation ....................................................... - (295,995)
--------- ---------
Net plant, property and equipment ................................................... - 190,415
--------- ---------
Total assets .................................................................... $ - $ 388,837
========= =========

LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------

Current liabilities
Accounts and drafts payable .......................................................... $ - $ 66,495
Accrued interest ..................................................................... 50 3,673
Note payable to general partner ...................................................... 2,800 -
Other accrued liabilities ............................................................ - 18,480
--------- ---------
Total current liabilities ........................................................ 2,850 88,648
--------- ---------

Long-term debt ......................................................................... - 272,410
Other liabilities ...................................................................... - 4,555
Deferred tax on gross margin ........................................................... 4,133 4,133
--------- ---------
Total liabilities ................................................................... 6,983 369,746
--------- ---------

Partners' capital (deficit)
Limited Partners .................................................................... (5,442) 20,371
General Partner ..................................................................... (1,541) (1,280)
--------- ---------
Total partners' capital (deficit) .............................................. (6,983) 19,091
--------- ---------

Total liabilities and partners' capital .......................................... $ - $ 388,837
========= =========

See Notes to Consolidated Condensed Financial Statements.

BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(In thousands)

Limited General
Partners Partner Total
-------- ------- -----

Balance at December 31, 1999 ................. $ 118,766 $ ( 286) $ 118,480
Net income ................................ 8,348 84 8,432
--------- --------- ---------
Balance at June 30, 2000 ..................... $ 127,114 $ ( 202) $ 126,912
========= ========== =========

Balance at December 31, 2000 ................. $ 20,371 $ (1,280) $ 19,091
Net loss .................................. (25,813) (261) (26,074)
---------- ---------- ----------
Balance at June 30, 2001 ..................... $ (5,442) $ (1,541) $ (6,983)
=========== =========== ==========

See Notes to Consolidated Condensed Financial Statements.

BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except Unit and per Unit data)

1. Basis of Presentation

Borden Chemicals and Plastics Limited Partnership (the "Company" or
"Partnership") is a Delaware limited partnership which owns a 98.9899% limited
partner interest as sole limited partner in Borden Chemicals and Plastics
Operating Limited Partnership (the "Operating Partnership"). BCP Management,
Inc. ("BCPM"), a wholly owned subsidiary of Borden Chemical, Inc., formerly
Borden, Inc. ("Borden"), owns a 1% interest as the sole general partner in the
Partnership and a 1.0101% interest as the sole general partner ("General
Partner") in the Operating Partnership, resulting in an aggregate 2% ownership
interest in the partnerships. BCPM manages the activities of the Partnership and
the Operating Partnership, and its activities are limited to such management.
The General Partner's interest in the Operating Partnership is reflected as
minority interest in the accompanying consolidated condensed financial
statements.

On April 3, 2001, the Operating Partnership and its wholly owned subsidiary BCP
Finance Corporation, filed a voluntary petition in the U.S. Bankruptcy Court to
reorganize under Chapter 11 of the U.S. Bankruptcy Code. Accordingly, as of
April 3, 2001, the Operating Partnership's operations are subject to the
jurisdiction of the Bankruptcy Court and are no longer controlled by the
Company. Accordingly, the Company no longer consolidates the Operating
Partnership's financial results in its condensed consolidated financial
statements, resulting in a change in reporting entity.

As a result of this change in reporting entity, the Company has restated its
fiscal 2001 results, effective January 1, 2001, to account for its investment in
the Operating Partnership under the equity method. Under the equity method, the
Partnership's share of the Operating Partnerships' income or loss is recorded in
earnings and as an adjustment to the Partnership's investment in the Operating
Partnership, to the extent that the Partnership's investment is not reduced
below zero. During the first quarter fiscal 2001, the Partnership's investment
in the Operating Partnership was reduced to zero, therefore, further losses
incurred by the Operating Partnership are no longer recognized by the
Partnership. The Partnership did not recognize its 99% share of the Operating
Partnership's losses amounting to $23.0 million and $40.9 million for the three
and six-month periods ended June 30, 2001, respectively.

These financial statements and the financial statements of the Operating Limited
Partnership appearing in Footnote 9 have been prepared on a going concern basis,
which contemplates continuity of operations, realization of assets, and payment
of liabilities in the ordinary course of business. As a result of the Chapter 11
filing, there is no assurance that the carrying amounts of assets will be
realized or that liabilities will be settled for amounts recorded. Financial
statements of the Operating Limited Partnership appearing in Footnote 9 have
been prepared in accordance with the AICPA's Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(SOP 90-7).

Accordingly, the accompanying condensed financial statements as of and for the
three and six-month periods ended June 30, 2001 include the consolidated
financial results of the Operating Partnership and its subsidiary on an equity
basis. See Notes 2 and 3 for recent events regarding the bankruptcy proceedings.
See Note 9 for the condensed consolidated financial information of the Operating
Limited Partnership.

The accompanying unaudited interim consolidated condensed financial statements
of the Partnership contain all adjustments, including normal recurring
adjustments, which in the opinion of the General Partner, are necessary for a
fair statement of the results for the interim periods in accordance with
accounting principles generally accepted in the United States of America.
Results for the interim periods are not necessarily indicative of the results
for the full year. The interim financial statements and notes should be read in
conjunction with the financial statements and accompanying notes in the
Partnership's fiscal 2000 Annual Report on Form 10-K.

Basic income (loss) per unit is computed by dividing net income (loss), after
subtracting the General Partner's 1% interest, by the weighted average number of
units outstanding. Currently, there are no potentially dilutive securities;
accordingly, basic income (loss) per unit and diluted income (loss) per unit are
equivalent.

2. Organization and Business

The Partnership is a holding company and does not have its own independent
operations and does not engage in any revenue producing activities. As of June
30, 2001, the Operating Partnership had three operating locations: its main
operating site in Geismar, Louisiana, which produces PVC resins, vinyl chloride
monomer and acetylene; a PVC resins plant located in Illiopolis, Illinois; and a
PVC resins plant in Addis, Louisiana. Its finished goods PVC resins are sold for
further processing into various end-use applications, such as plastic pipe and
pipefittings, vinyl siding and window

frames, vinyl flooring and other applications. The acetylene plant located in
Geismar, Louisiana has been idled since December 2000.

On April 3, 2001, the Operating Partnership and its wholly owned subsidiary, BCP
Finance Corporation, (collectively, "the Debtors") elected to seek bankruptcy
court protection to develop and implement a financial reorganization because,
despite management's continuing efforts to reduce the exposure to natural gas,
depressed resin prices and demand converged with sharply increased energy costs
in the first quarter of 2001 to create a critical debt and liquidity situation.
Management is in the process of developing strategies to restructure the
Operating Partnership's financial affairs and allow it to emerge from
bankruptcy. These strategies could include seeking strategic investors, lenders,
and/or joint venture partners, selling substantial assets or pursuing a merger
or other strategic transactions. There can be no assurance that management's
efforts in this regard will be successful. The support of the Company's vendors,
customers, lenders, unitholders and employees will continue to be key to the
Company's future success.

Management has undertaken several initiatives to improve liquidity, including
idling unprofitable or high cost assets and production facilities, wage freezes,
reductions-in-force and entering into the credit facilities as described in Note
3. However, given current business and market conditions, there can be no
assurance that the Partnership or Operating Partnership will be able to meet its
financial obligations in the future.

3. Proceedings Under Chapter 11

Subsequent to the commencement of the Operating Partnership Chapter 11, the
Debtors sought and obtained several orders from the Bankruptcy Court which were
intended to stabilize and continue business operations. The most significant of
these orders (i) approved an amendment (the "Primary DIP Facility") to the
prepetition Year 2000 Revolving Credit Facility (the "Prepetition Credit
Facility") providing up to $100 million of debtor-in-possession financing, (ii)
permitted continued operation of the consolidated cash management system during
the Operating Partnership Chapter 11 case in substantially the same manner as it
was operated prior to the commencement of the Operating Partnership Chapter 11
case, (iii) authorized payment of pre-petition wages, vacation pay and employee
benefits and reimbursement of employee business expenses, and (iv) authorized
payment of pre-petition obligations to certain vendors critical to the Operating
Partnership's ability to continue its operations.

The Primary DIP Facility, which received final Approval of the Bankruptcy Court
on July 11, 2001, provides the Operating Partnership with a revolving line of
credit in an aggregate amount not to exceed $100 million, subject to borrowing
base limitations, and bears interest at the Alternate Base Rate plus 1.25%. The
Operating Partnership has used amounts borrowed under the Primary DIP Facility
for its ongoing working capital needs and for certain other purposes of the
Operating Partnership as permitted by that facility. The Operating Partnership
granted a security interest to the DIP Lenders in substantially all of the
Operating Partnership's assets as security for its obligations under the Primary
DIP Facility. All obligations under the Primary DIP Facility are afforded
"super-priority" administrative expense status in the Operating Partnership
Chapter 11 case. The Primary DIP Facility matured on March 31, 2002, but the
lenders have agreed, and the Bankruptcy Court has approved, the extension of the
maturity date to April 30, 2002.

In light of the possibility that the Primary DIP Facility would be insufficient
to finance the Operating Partnership's working capital needs during the period
required to obtain confirmation of a plan of reorganization for the Debtors, the
Operating Partnership approached a number of institutional lenders to assess
their interest in extending additional credit to the Debtors. None of these
lenders were willing to provide credit or terms acceptable to the Operating
Partnership. The Operating Partnership requested its general partner, BCPM, to
provide a loan to it. On October 31, 2001, the Debtors filed an initial motion
with the Bankruptcy Court seeking an interim order to obtain additional,
secondary postpetition financing (the "Secondary DIP Facility") from BCPM. The
terms of the proposed Secondary DIP Facility were negotiated, on the one hand,
by management of the Operating Partnership and the Debtors' legal counsel and,
on the other hand, by officers of BCPM and BCPM's legal counsel, with the
approval of the Independent Committee of the Board of Directors of BCPM which is
comprised of three outside directors who are not employees of the Operating
Partnership, BCPM or Borden. The negotiations included efforts to obtain the
support of the lenders under the Primary DIP Facility and the Official Committee
of Unsecured Creditors appointed in the Operating Partnership Chapter 11 case.
The Creditors Committee filed an objection to the initial motion on November 6,
2001.

Facility. Subject to the terms and conditions of the Secondary DIP Facility,
BCPM has agreed to makes loans to the Operating Partnership through March 31,
2002, in an aggregate amount not to exceed $10 million for working capital,
other general corporate purposes and to make payments on the Primary DIP
Facility. The loans are unsecured, bear interest at the Alternate Base Rate
specified in the Primary DIP Facility plus 2.75% and mature on March 31, 2002.
The Creditors Committee also objected to the revised Secondary DIP Facility.
After a hearing, the Bankruptcy Court entered an order on December 20, 2001,
granting interim approval to $5 million in loans under the Secondary DIP
Facility.

On March 22, 2002, BCPM, the General Partner of the Company and the Operating
Partnership, filed a voluntary petition under Chapter 11 of the Bankruptcy Code.
As of the date of the filing, BCPM had cash of approximately $25 million, a
claim of approximately $4 million against the Operating Partnership for
repayment of borrowings under the Secondary DIP Facility, and claims of
approximately $6.6 million against the Operating Partnership for unreimbursed
expenses of the Company and the Operating Partnership paid by BCPM, the payment
of which is subject to the approval of the Bankruptcy Court.

On March 22, 2002, BCPM filed a motion in the General Partner Bankruptcy
requesting authority to extend the maturity date of the Secondary DIP Facility
and approval of the second $5 million of lending authority under the Secondary
DIP Facility. This motion was approved by the Bankruptcy Court on March 27,
2002. It is anticipated that the Operating Partnership will require borrowings
from BCPM in excess of the amounts previously committed, or approved by the
Bankruptcy Court, under the Secondary DIP Facility in order to continue
operations until the Operating Partnership completes the sale of certain of its
assets. BCPM may file a motion requesting authority to make further loans to the
Operating Partnership. There can, however, be no assurance that BCPM will be
authorized by the Bankruptcy Court to make further loans to the Operating
Partnership or that the Operating Partnership will be authorized by the
Bankruptcy Court to make further borrowings from BCPM.

The Operating Partnership has been exploring various strategic alternatives,
including possible mergers or joint ventures or a sale or sales of substantially
all of its assets. This strategy had been announced by the Company and the
Debtors to the public, creditors and the Bankruptcy Court in various public
filings, press releases and pleadings. Prior to the filing of the Operating
Partnership Chapter 11 case, the Operating Partnership had retained Taylor
Strategic Divestitures Corporation ("Taylor") to provide investment-banking
services in connection with its attempts to complete an asset sale or other
transaction. On September 28, 2001, the Bankruptcy Court entered an order
approving the Debtors' retention of Taylor and a fee structure for its services.

Throughout the Operating Partnership Chapter 11 case, Taylor has worked with the
Debtors to identify and contact potential candidates for asset purchases or
other transactions. Beginning in June 2001, certain potential purchasers
submitted non-binding expressions of interest for certain of the Debtors'
assets. On August 24, 2001, the Debtors filed a motion with the Bankruptcy Court
for an order approving bidding procedures for the sale of substantially all of
the Debtors' assets. An order approving bidding procedures was entered by the
Bankruptcy Court on October 12, 2001. The procedures include a five-stage
process for marketing assets, negotiating with potential purchasers, conducting
an auction if needed, and obtaining court approval of sales of principal assets.

Following due diligence by several candidates, the number and amount of the bids
declined. Several candidates cited the events of September 11, 2001 and related
events for withdrawing from the bidding process, while others offered business
reasons for declining to bid. The Operating Partnership has, however, continued
to solicit bids and has conducted discussions with a number of candidates.

On December 3, 2001, the Debtors filed a motion with the Bankruptcy Court
seeking approval of an asset purchase agreement with Shintech Louisiana, LLC
("Shintech") regarding the sale of the assets and operations of the Addis plant.
Shintech agreed to pay: (i) $38 million for the Addis plant, (ii) the value of
the Addis inventory and accounts receivable, and (iii) the cost of severance
benefits for certain Addis employees. The sale excludes certain items such as
cash, intercompany accounts, claims against third parties and equity interests
in certain entities. The sale was approved by the Bankruptcy Court on December
20, 2001, and closed on February 28, 2002. The proceeds from the sale of the
Addis plant were applied to pay expenses of the transaction and outstanding
borrowings under the Primary DIP Facility.

on March 27, 2002. If the transaction closes, a portion of the proceeds from the
sale of the Illiopolis plant will be applied to pay outstanding borrowings under
the Primary DIP Facility.

The Operating Partnership continues to explore possible dispositions of the
Geismar plant, but there is no assurance that a sale of the plant will be
completed. The Operating Partnership is continuing to operate the Illiopolis
plant at the present time, and began idling the Geismar plant in March 2002. On
December 12, 2001 the Creditors Committee filed a motion seeking an order
requiring the Debtors to abandon the assets comprising the Geismar plant. The
Debtors objected to the motion. The Bankruptcy Court held an initial hearing on
this motion on December 20, 2001, and the motion remains pending at this time.

It is not anticipated that holders of the Company's Common Units will receive
any distribution as a result of any sales of the Operating Partnership's assets
or the Debtors' plan of reorganization.

4. Environmental and Legal Proceedings

Under an Environmental Indemnity Agreement (the "EIA") with Borden, Inc.
("Borden"), Borden has agreed, subject to certain specified limitations, to
indemnify the Partnership in respect of environmental liabilities arising from
facts or circumstances that existed and requirements in effect prior to November
30, 1987, the date of the initial sale of the Geismar and Illiopolis plants to
the Partnership. The Partnership is responsible for environmental liabilities
arising from facts or circumstances that existed and requirements that become
effective on or after such date. With respect to certain environmental
liabilities that may arise from facts or circumstances that existed and
requirements in effect both prior to and after such date, Borden and the
Operating Partnership will share liabilities on an equitable basis considering
all of the facts and circumstances including, but not limited to, the relative
contribution of each to the matter and the amount of time each has operated the
assets in question (to the extent relevant). No claims can be made under the EIA
for liabilities incurred after November 30, 2002.

The Operating Partnership is subject to extensive federal, state and local
environmental laws and regulations which impose limitations on the discharge of
pollutants into the air and water, establish standards for the treatment,
storage, transportation and disposal of solid and hazardous wastes, and impose
obligations to investigate and remediate contamination in certain circumstances.
The Operating Partnership has expended substantial resources, both financial and
managerial, and it anticipates that it will continue to do so in the future.
Failure to comply with the extensive federal, state and local environmental laws
and regulations could result in significant civil or criminal penalties and
remediation costs.

The Operating Partnership is subject to legal proceedings and claims which may
arise in the ordinary course of business. Management of the Operating
Partnership believes, based on the information it currently possesses, that the
amount of the ultimate liability, taking into account its insurance coverage,
including its risk retention program and Environmental Indemnity Agreement with
Borden, is unlikely to have a material adverse effect on the financial position
or results of operations of the Operating Partnership. Any potential liability
may be impacted by the Operating Partnership Chapter 11 case described in Note
2.

5. Debt

On May 1, 1995, the Operating Partnership issued $200 million aggregate
principal amount of 9.5% Notes due 2005 (the "Notes") pursuant to an Indenture
dated as of May 1, 1995 (the "Indenture"). The Notes are senior unsecured
obligations of the Operating Partnership. The Notes include restrictions on the
Operating Partnership's ability to make cash distributions, incur additional
indebtedness, sell assets, engage in sale/leasebacks and to take certain other
actions. Upon a Change in Control, the holders of the Notes may require the
Operating Partnership to repurchase their Notes at a price equal to 101% of the
aggregate principal amount plus accrued and unpaid interest to the date of
repurchase As a result of the filing of the Operating Partnership Chapter 11
case described in Note 2, no payments will be made by the Debtors on the Notes
except as approved by the Bankruptcy Court.

6. Segment Information

Prior to fiscal 2000, the Company operated in three reportable segments as
defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". The segments were PVC Polymers Products, Methanol and
Derivatives and Nitrogen Products. The Partnership identifies its reportable
segments based on the internal organization

that is used by management for making operating decisions and assessing
performance.

During fiscal 2000, the Partnership exited its Methanol and Derivatives and
Nitrogen Products business segments. Consequently, the Partnership now operates
in only the PVC Polymers Products business segment, which consists of PVC
resins, ethylene-based vinyl chloride monomer (for internal consumption), and
its currently idled acetylene and acetylene-based vinyl chloride monomer
operations.

7. Related Party Transactions

The Company and the Operating Partnership are managed by BCPM, subject to orders
of the Bankruptcy Court, pursuant to the Amended and Restated Partnership
Agreement of the Company and the Amended and Restated Partnership Agreement of
the Operating Partnership, respectively. Neither the Company nor the Operating
Partnership directly employs any of the persons responsible for managing or
operating the business of the Operating Partnership, but instead relies on the
officers and employees of the General Partner and of Borden who provide support
to or perform services for the General Partner and reimburses the General
Partner or Borden (on its own or on the General Partner's behalf) for their
services.

The Operating Partnership sold its formaldehyde and certain other assets for
$48.5 million to Borden on July 28, 2000. As part of the transaction, the
Operating Partnership and Borden entered into a series of agreements with
respect to the operations of the parties at the Geismar complex, including the
provision of utilities and other services by the Operating Partnership to
Borden's facilities, the provision of dock capacity by Borden to the Operating
Partnership at Borden's dock facility, the provision of a control room by Borden
to the Operating Partnership, and indemnification of Borden by the Operating
Partnership for any environmental liability relating to the assets purchased by
Borden during the period in which they were owned by the Operating Partnership.

In April 2001, the Partnership borrowed $2.8 million from BCPM in order to pay
federal gross margin taxes, and has issued a demand note, bearing interest at
prime rate plus 1.50%, payable to BCPM for the same amount. The Partnership has
also recorded a deferred tax liability of $4.1 million and a receivable of $6.9
million from the Operating Partnership for future reimbursement of these taxes.
Management believes the Partnership is entitled to reimbursement for these
obligations by the Operating Partnership, pursuant to the Partnership Agreement
and consistent with past practice; however, such reimbursement is subject to
approval of the Bankruptcy Court. This receivable was written down to zero upon
the Operating Partnership filing for bankruptcy due to the uncertainty
surrounding the ultimate collection of these amounts.

On January 14, 2002, the General Partner and the Operating Partnership entered
into the Secondary DIP Facility which, as amended on March 29, 2002, commits the
General Partner to make loans to the Operating Partnership through April 30,
2002, in an aggregate amount not to exceed $10 million for working capital,
other general corporate purposes and to make payments on the Primary DIP
Facility.

8. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Accounting Standard No. 141, "Business Conditions". This statement requires
that all business combinations in the scope of this statement are to be
accounted for using one method, the purchase accounting method.

Also in June 2001, the FASB issued Statement of Accounting Standard No. 142,
"Goodwill and Other Intangible Assets". This statement addresses how intangible
assets that are acquired individually or within a group of other assets (but not
those acquired in a business combination) should be accounted for in financial
statements upon their acquisition. This statement also addresses how goodwill
and other intangible assets should be accounted for after they have been
initially recognized in the financial statements. This statement currently would
not have an impact on the Company's financial statements.

In August 2001, the FASB issued Statement of Accounting Standard No. 143,
"Accounting for Obligations Associated with the Retirement of Long-Lived
Assets". This standard is effective for fiscal years beginning after June 15,
2002. The Statement would require that (1) an existing legal obligation
associated with the retirement of a tangible long-lived asset be recognized as a
liability when incurred and the amount of the liability be initially measured at
fair value (2) an entity recognize subsequent changes in the liability that
result from (a) the passage of time and (b) revisions in either the

timing or amount of estimated cash flows; and (3) upon initially recognizing a
liability for an Asset Retirement Obligation, an entity capitalized the cost by
recognizing an increase in the carrying amount of the related long-lived asset.
The Partnership has not yet evaluated the impact of this statement.

In October 2001, the FASB issued Statement of Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". This standard
is effective for fiscal years beginning after December 15, 2001. The Statement
addresses issues relating to the implementation of FASB Statement No. 121 (FAS
121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and to develop a single accounting model, based on the
framework established in FAS 121, for long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired. The Partnership has
not yet evaluated the impact of this Statement.

9. Consolidated Condensed Interim Debtor-in-Possession Financial Statements of
Borden Chemicals and Plastics Operating Limited Partnership

The consolidated condensed interim Debtor-In-Possession financial statements of
the Operating Partnership as of and for the three and six months ended June 30,
2001 are as follows:

DEBTOR-IN-POSSESSION FINANCIAL STATEMENTS
BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)

Three Months Ended Three Months Ended
------------------ ------------------

June 30, 2001 June 30, 2000
------------- -------------

Revenues

Total revenues ............................................. $ 93,348 $ 139,707
---------- -----------

Expenses
Cost of goods sold ....................................... 100,278 116,626
Marketing, general & administrative expense .............. 5,415 6,417
Impairment of long-lived assets .......................... (945) -
Interest expense (excluding contractual interest of
$4,600 for 2001) .................................... 2,270 7,235
Tax on gross margin ...................................... - 710
Equity on loss of affiliate .............................. 677 233
Other (income) expense ................................... 2,992 (234)
Reorganization items:
Professional fees ................................. 2,510 -
Loss on debt issuance costs ....................... 3,755 -
Gain on settlement of pre-petition claims ......... (377) -
---------- -----------

Total expenses ................................ 116,575 130,987
---------- -----------

Net income (loss) from continuing operations ............... $ (23,227) $ 8,720
---------- -----------

Discontinued operations
Loss from discontinued operations, net ................... - (5,589)
Gain on disposal of discontinued operations .............. - 5,012
---------- -----------

Net income (loss) .......................................... $ (23,227) $ 8,143
=========== ===========

DEBTOR-IN-POSSESSION FINANCIAL STATEMENTS
BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)

Six Months Ended Six Months Ended
---------------- ----------------

June 30, 2001 June 30, 2000
------------- -------------

Revenues

Total revenues ................................................ $ 194,803 $ 280,185
----------- ----------

Expenses
Cost of goods sold .......................................... 221,786 236,504
Marketing, general & administrative expense ................. 11,777 13,559
Impairment of long-lived assets ............................. (945) -
Interest expense (excluding contractual interest of
$4,600 for 2001) ...................................... 8,915 14,698
Tax on gross margin ......................................... - 1,460
Equity on loss of affiliate ................................. 934 493
Other (income) expense ...................................... 5,980 (227)
Reorganization items:
Professional fees .................................... 3,590 -
Loss on debt issuance costs .......................... 3,755 -
Gain on settlement of pre-petition claims ............ (377) -
----------- ----------

Total expenses ................................... 255,415 266,487
----------- ----------

Net income (loss) from continuing operations .................. $ (60,612) $ 13,698
----------- ----------

Discontinued operations
Loss from discontinued operations, net ...................... - (10,192)
Gain on disposal of discontinued operations ................. - 5,012
----------- ----------

Net income (loss) ............................................. $ (60,612) $ 8,518
=========== ==========

DEBTOR-IN-POSSESSION FINANCIAL STATEMENTS
BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)

June 30, 2001 June 30, 2000
------------- -------------

Cash Flows From Operations
Net income (loss) ........................................................ $ (60,612) $ 8,518
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Gain on disposal of discontinued operations, net ................... - (5,012)
Depreciation ....................................................... 13,320 19,311
Increase (decrease) in certain assets and liabilities:
Change in receivables .............................................. 21,212 (7,071)
Change in inventory ................................................ 22,009 (4,985)
Change in accounts payable ......................................... (3,730) (13,221)
Other .............................................................. 1,437 (3,087)
Reorganization items:
Payment of professional fees ....................................... (1,880) -
Loss on debt issuance costs ........................................ 3,755 -
Gain on settlement of pre-petition claims .......................... (377) -
---------- ---------
Net cash flows provided (used) by operating activities ..................... (4,866) (5,547)
---------- ---------

Cash Flows From Investing Activities
Capital expenditures .................................................. (4,717) (4,586)
Plant acquisition ..................................................... - (8,177)
Proceeds from note receivable ......................................... 9,700 -
---------- ---------
Net cash flows provided (used) by investing activities ..................... 4,983 (12,763)
---------- ---------

Cash Flows From Financing Activities
Gross borrowings under line-of-credit agreement ........................ 91,126 162,830
Gross repayments under line-of-credit agreement ........................ (92,365) (139,779)
Payment of debt issuance costs ......................................... (1,360) (1,113)
---------- ---------
Net cash flows provided (used) by financing activities ..................... (2,599) 21,938
---------- ---------

Change in cash and equivalents ............................................. (2,482) 3,628

Cash and equivalents at beginning of period ................................ 3,223 5,759
---------- ---------

Cash and equivalents at end of period ...................................... $ 741 $ 9,387
========== =========

DEBTOR-IN-POSSESSION FINANCIAL STATEMENTS
BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
(Unaudited)

ASSETS June 30, 2001 December 31, 2000
- ------ ------------- -----------------

Current assets
Cash and equivalents ................................................................ $ 741 $ 3,223
Accounts receivable (less allowance for doubtful accounts of $434
and $1,843 respectively)
Trade ...................................................................... 58,951 58,444
Related parties ............................................................ 609 22,328
Inventories:
Finished and in process goods .............................................. 26,300 44,024
Raw materials and supplies ................................................. 8,679 12,964
Other current assets ................................................................ 10,785 15,907
--------- ---------
Total current assets ............................................................ 106,065 156,890
--------- ---------
Other assets
Investments in and advances to affiliated companies ................................. 3,979 4,124
Other assets ........................................................................ 33,677 37,408
--------- ---------
Other assets ................................................................ 37,656 41,532
--------- ---------

Plant, property and equipment ............................................................ 491,303 486,410
Less accumulated depreciation and write-downs ....................................... (309,031) (295,995)
--------- ---------
Net plant, property and equipment ................................................... 182,272 190,415
--------- ---------
Total assets ..................................................................... $ 325,993 $ 388,837
========= =========

LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Liabilities not subject to compromise:
Current liabilities
Priority debt ........................................................................ $ 71,171 $ -
Accounts and drafts payable .......................................................... 14,473 66,495
Accrued interest ..................................................................... 451 3,673
Other accrued liabilities ............................................................ 7,191 18,480
--------- ---------
Total current liabilities ...................................................... 93,286 88,648
--------- ---------

Long term debt ........................................................................ - 272,410
Other liabilities ...................................................................... 2,267 4,914
Deferred tax on gross margin ........................................................... 4,133 4,133
--------- ---------
Total liabilities not subject to compromise ..................................... 99,686 370,105
--------- ---------

Liabilities subject to compromise
Accrued interest ...................................................................... 8,073 -
Long-term debt ........................................................................ 200,000 -
Pre-petition accounts payable ......................................................... 47,915 -
Other accrued liabilities ............................................................. 12,199 -
--------- ---------
Total liabilities subject to compromise ............................................ 268,187 -
--------- ---------

Partners' capital (deficit)
General Partner ..................................................................... (971) (359)
Limited Partners .................................................................... (40,909) 19,091
--------- ---------
Total partners' capital (deficit) .............................................. (41,880) 18,732
--------- ---------
Total liabilities and partners' capital .......................................... $ 325,993 $ 388,837
========= =========

BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED CONDENSED DEBTOR-IN-POSSESSION FINANCIAL STATEMENTS
- -------------------------------------------------------------------------

1. Liabilities subject to compromise

Liabilities subject to compromise refer to liabilities incurred prior to the
commencement of the Operating Partnership Chapter 11 case. These liabilities
consist primarily of amounts outstanding under the Company's long-term debt and
also include accounts payable, accrued interest, and other accrued expenses.
These amounts represent management's best estimate of known or potential claims
to be resolved in connection with the Operating Partnership Chapter 11 case. The
bar date was established as of October 19, 2001. The bar date is the date by
which claims against the Company must be filed if the claimants wish to receive
any distribution in the Chapter 11 Cases. Certain creditors have submitted
claims in excess of the amounts recorded as liabilities by the Operating
Partnership. Such claims remain subject to future adjustments based on
negotiations and reconciliation with applicable creditors, actions of the
Bankruptcy Court, further developments with respect to disputed claims, or other
events. Payment terms for these amounts, which are considered long-term
liabilities at this time, will be established in connection with the Operating
Partnership Chapter 11 case and as such, the ultimate amount of such liabilities
is presently not determinable. The Operating Partnership has received approval
from the Bankruptcy Court to pay or otherwise honor certain of its pre-petition
obligations, including pre-petition wages, vacation pay, employee benefits and
reimbursement of employee business expenses. The Bankruptcy Court also has
authorized the Company to pay pre-petition obligations to critical vendors to
aid the Company in maintaining its normal operations. As of June 30, 2001, the
Company had made no such payments. In the second quarter, in accordance with SOP
90-7, the Company wrote off debt issuance costs of $3.8 million associated with
the Subordinated Notes as a result of the bankruptcy proceeding.

Liabilities subject to compromise consist of the following as of June 30, 2001
(in thousands):

Accrued interest $ 8,073
Long-term debt 200,000
Pre-petition accounts payable 47,915
Other accrued liabilities 12,199
----------
Total liabilities subject to compromise $ 268,187
==========

2. Related party transactions

The Operating Partnership sold its formaldehyde and certain other assets for
$48.5 million to Borden on July 28, 2000. As part of the transaction, the
Operating Partnership and Borden entered into a series of agreements with
respect to the operations of the parties at the Geismar complex, including the
provision of utilities and other services by the Operating Partnership to
Borden's facilities at an annual charge of approximately $1.2 million for 2001,
the provision of dock capacity by Borden to the Operating Partnership at
Borden's dock facility, the provision of a control room by Borden to the
Operating Partnership, and indemnification of Borden by the Operating
Partnership for any environmental liability relating to the assets purchased by
Borden during the period in which they were owned by the Operating Partnership.

The Company subleased 99 railcars from Borden at an annual cost of $0.5 million.
As part of the Bankruptcy Court proceedings, the Company elected to reject the
sublease agreement with Borden. As a result of this lease rejection, Borden has
offset approximately $1.8 million from the proceeds of the $37.5 million note
used to capitalized BCPM. BCPM has a claim against the Company for the amount of
this offset. As part of the Borden offset, invoices amounting to $0.3 million
for exchanges, environmental and utility services were also offset.

The employees of BCPM (together with employees providing support to or services
for BCPM) operate the Partnership and participate in various General Partner
benefit plans including pension, retirement savings, post-retirement other than
pension, post employment, and health and life insurance. The Partnership has no
direct liability for such benefits since the Partnership does not directly
employ any of the persons responsible for managing and operating the
Partnership, but instead reimburses the General Partner (on its own or BCPM's
behalf) for their services. Charges to the Partnership for such services are
actuarially determined where appropriate. The Partnership expenses the full
amount of such charges but only reimburses the General Partner (on its own or
BCPM's behalf) for actual benefits paid. The difference between cash payments to
the General Partner (on its own or BCPM's behalf) and expense is accrued on the
Partnership's books. The General Partner maintains a post-retirement and
disability plan for employees of the General Partner. This liability was
approximately $3.8 million as of June 30, 2001.

During the six months ended June 30, 2001, BCPM made unreimbursed severance
payments totaling $0.4 million to former employees of the General Partner.
In addition, BCPM also made unreimbursed payments for certain professional
services and other expenses of $0.2 million. The Operating Partnership has
reflected these payments as expense in the condensed statement of operations and
have recorded a corresponding payable to BCPM, which liability is included in
liabilities subject to compromise in the accompanying consolidated condensed
balance sheet at June 30, 2001.

3. Subsequent events

In December 2001, the Operating Partnership entered into a Loan Agreement "Loan
Agreement" with BCPM whereby BCPM will provide loans up to $10 million for the
Operating Partnership to use for working capital requirements or other general
corporate purposes in the event that there is no borrowing availability under
the Operating Partnership's revolving credit facility with Fleet. The Operating
Partnership may only borrow pursuant to this Loan Agreement if there is no
positive borrowing availability under the Operating Partnership's revolving
credit facility with Fleet. Borrowings under the Loan Agreement are payable on
the earlier of a) March 31, 2002, b) the date of confirmation of a plan of
reorganization, c) the date upon which the sale of substantially all of the
Operating Partnership's assets has been completed, or d) an event of default.
Borrowings under the Loan Agreement bear interest at the Alternate Base Rate
plus 2.75%. The Bankruptcy Court approved the Loan Agreement for borrowings up
to $5 million. Borrowings under the Loan Agreement have been granted
administrative claim status. The Primary DIP Facility matured on March 31, 2002,
but the lenders have agreed, and the Bankruptcy Court has approved, the
extension of the maturity date to April 30, 2002.

The Operating Partnership announced on March 8, 2002, that it had executed an
asset purchase agreement for the plant at Illiopolis, Illinois, with Formosa
Plastics Corporation, Delaware, which proposes to pay approximately $35 million
for the plant and working capital, subject to adjustments. The Bankruptcy Court
approved the Illiopolis transaction at a hearing on March 27, 2002. If the
transaction closes, a portion of the proceeds from the sale of the Illiopolis
plant will be applied to pay outstanding borrowings under the Primary DIP
Facility.

It is not anticipated that holders of the Company's Common Units will receive
any distribution as a result of any sales of the Operating Partnership's assets
or the Debtors' plan of reorganization.

Management has undertaken several other initiatives to improve liquidity,
including idling unprofitable or high cost assets and production facilities,
wage freezes and reductions-in-force. However, given current business and market
conditions and the financial condition of the Debtors, there can be no assurance
that the Operating Partnership will be able to meet its financial obligations in
the future. At this time, sales of Operating Partnership assets are not expected
to generate enough cash to make a distribution to unit holders of the Company or
to satisfy all of the Operating Partnership's debts.

In the third quarter, an impairment charge of $123.0 million will be recorded to
write-down to fair value long-lived assets associated with the Geismar and Addis
facilities in accordance with FAS 121 "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of" as the Company's estimates of
future undiscounted cash flows associated with these facilities no longer
recovered the asset's carrying value. Estimates of future undiscounted cash
flows were lowered during the 3rd quarter as a result of several factors
including the expected loss of a significant customer contract, continued
deterioration in the overall economy, and an extended forecast in the expected
upturn of the PVC industry from previous projections. The fair value of the
assets was estimated by management based on various sources including binding or
non-binding bids or offers from third parties, other discussions with third
parties, and an independent asset valuation.

An additional impairment charge of $22.6 million will be recorded in the fourth
quarter of 2001 to write-down to fair value, long-lived assets associated with
the Corporate office and the Illiopolis facility. These impairment charges
represent the write-down of all the Company's assets to fair market value, as
all of the assets became held for sale in the fourth quarter.

4. Restructuring and Related charges

During the first half of 2001, the Company recorded restructuring charges of
$10.0 million primarily associated with the bankruptcy court proceedings and
severance costs.

Restructuring charges for bankruptcy reorganization include professional fees of
$3.6 million, a write off of pre-petition debt issuance costs of $3.8 million
and a gain from the settlement of a pre-petition liability of $0.4 million.

In the first half of 2001, the Company severed 81 employees, paying $2.0 million
in severance payments. At the end of the second quarter, additional severance
costs of $0.9 million were accrued. The Company continues to pay 75% of the cost
of medical and dental insurance for severed employees for up to six months after
termination. This will continue as long as the Company has the ability to
provide and maintain a group medical plan. The cost of these health benefits for
severed employees in the first half of 2001 was $0.1 million.

Additional restructuring and related charges will occur in the third and fourth
quarters. Third quarter restructuring and related charges will include an
impairment charge for the Addis and Geismar assets of $123.0 million and
severance expense of $0.6 million. Fourth quarter restructuring and related
charges will include an impairment charge for Illiopolis and the Corporate
assets of $22.6 million, severance costs of $11.5 million and estimates for
idlement of the Geismar facility of approximately $7.9 million.

The following is a schedule of the restructuring and related charges recorded in
the six months ended June 30, 2001:

(in millions)
Description Type Charge Payment Balance*
- ----------------------------------------------------------------------------------------------------------------------

Severance Cash $2.9 ($2.0) $0.9
Benefits Cash 0.1 (0.1) 0.0
Bankruptcy - professional fees Cash 3.6 (2.2) 1.4
Bankruptcy - claim settlement Cash (0.4) 0.4 0.0
--------- ------- -------
Total cash 6.2 ($3.9) $2.3

Bankruptcy - debt issuance costs Non-cash 3.8
--------
Total non-cash 3.8
--------
Total $10.0
--------

*Outstanding balance at June 30, 2001 is recorded in current liabilities not
subject to compromise.

5. Commitments and Contingencies.

The Company has entered into a fifteen year supply agreement (commencing in
1997) to provide a long-term supply of ethylene, a raw material, and minimize
price volatility. The purchase price for product varies with the supplier's raw
material and variable costs, which are market-driven, as well as its fixed
processing costs.

Contingencies for the Company include lawsuits and claims, which arise in the
normal course of business and contingencies in the fourth quarter for idlement
and closure of the Geismar facility. Management continues to explore possible
dispositions of the Geismar facility, but there is no assurance that a sale of
the plant will be completed and the plant was idled in March 2002. In the fourth
quarter, a contingency for the closure costs of the Geismar plant will be
established in the amount of $5.8 million. An additional contingency of $1.7
million for obligations to rejected leases will also be established. It is the
opinion of management that the assessment of contingencies is reasonable and the
reserves are adequate. However, there can be no assurance that future operating
results will not be materially different from these estimates.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------

On April 3, 2001, the Operating Partnership and its wholly owned subsidiary BCP
Finance Corporation, (the "Debtors") filed voluntary petitions for protection
under Chapter 11 of the Bankruptcy Code, 11 U.S. C. 101-1330 in the United
States Bankruptcy Court for the District of Delaware under case number 01-1268
(RRM) and 01-1269 (RRM) ("The Operating Partnership Chapter 11 case"). The
Operating Partnership Chapter 11 case has been procedurally consolidated for
administrative purposes only. The Debtors are currently acting as
debtors-in-possession pursuant to the Bankruptcy Code.

Due to the bankruptcy filing, the Company no longer consolidates the Operating
Partnership's financial results in its condensed consolidated financial
statements, resulting in a change in reporting entity. As a result of this
change in reporting entity, the Company has restated its fiscal 2001 results,
effective January 1, 2001, to account for its investment in the Operating
Partnership under the equity method. Under the equity method, the Company's
share of the Operating Partnerships' income or loss is recorded in earnings and
as an adjustment to the Company's investment in the Operating Partnership, to
the extent that the Company's investment is not reduced below zero. During the
first quarter fiscal 2001, the Company's investment in the Operating Partnership
was reduced to zero, therefore, further losses incurred by the Operating
Partnership are no longer recognized by the Company. The Company did not
recognize its 99% share of the Operating Partnership's losses amounting to $23.0
million and $40.9 million for the three and six-month periods ended June 30,
2001, respectively.

The Company is a holding company and does not have its own independent
operations, engage in any revenue producing activities, maintain its own bank
accounts nor does it have any cash flows. Prior to the Operating Partnership
filing for bankruptcy, certain obligations of the Company, including gross
margin taxes, were paid by BCPM and reimbursed by the Operating Partnership, as
management believes these expenses are reimbursable expenses pursuant to the
Partnership Agreement and past practice.

The Company's $2.8 million gross margin tax obligation due in April 2001 was
paid by BCPM and in return, the Company issued a demand note payable to BCPM.
Certain other expenses, primarily for accounting and legal services, of
approximately $0.6 through June 30, 2001 and $3.6 million through February 2002
have also been funded by BCPM. It is the position of BCPM that these expenses
are reimbursable by the Operating Partnership pursuant to the Partnership
Agreement and consistent with past practice; however, such reimbursement is
subject to approval of the Bankruptcy Court. It is the position of BCPM that it
is not required to make capital contributions or further loans to, or advances
on behalf of, the Company. However, BCPM will consider making additional loans
and advances upon request of the Company, taking into account the interests of
its creditors, but there can be no assurance that BCPM will make further loans
or advances in the future. The Partnership recorded interest of approximately
$50,000 associated with this note.

To the extent that payments for Company obligations are not made by BCPM, are
not deemed to be reimbursable expenses from the Operating Partnership by the
bankruptcy court, or the Operating Partnership does not have the ability to pay
expenses deemed to be reimbursable, the Partnership would not have the
wherewithal or ability to pay these obligations.

Due to the change in reporting entity discussed above, a comparative analysis
and discussion of the Company's operations is not deemed to be meaningful. The
following management discussion pertaining to the results of operations and
liquidity of the Operating Partnership are included as management believes this
is the most meaningful manner in which to explain the changes in the losses from
its equity investment in the Operating Partnership.

Overview and Outlook

The Operating Partnership exited the Methanol and Derivatives and the Nitrogen
Products businesses in 2000, and its revenues are now derived principally from
the sale of PVC resins.

The markets for and profitability of PVC resins have been, and are likely to
continue to be, cyclical. Periods of high demand, high capacity utilization and
increasing operating margins tend to result in new plant investment and
increased production until supply exceeds demand, followed by periods of
declining prices and declining capacity utilization and decreased margins until
the cycle is repeated. In addition, markets for the Operating Partnership's
products are affected by general economic conditions and a downturn in the
economy could have a material adverse effect on the Operating Partnership,
including, but not limited to, its ability to service its debt obligations. The
demand for the Operating

Partnership's PVC products is primarily dependent on the construction and
automotive industries.

Historically, natural gas has been a principal raw material feedstock, the price
of which has been volatile in recent years. The other principal feedstocks are
ethylene and chlorine. Prices for these raw materials may change significantly
from year to year.

Prices for PVC improved somewhat during the first half of 1997, but then
declined due to competitive market conditions experienced in the second half of
1997. Published prices for PVC during the fourth quarter of 1997 declined to an
average of approximately $0.30 per pound. PVC continued to decline in 1998.
General competitive conditions and reduced demand for PVC in the Far East kept
downward pressure on selling prices through 1998 with the fourth quarter price
in the $0.24 per pound range. Prices for PVC steadily increased each quarter in
1999, with the fourth quarter price averaging approximately $0.36 per pound.
During the first half of 2000, selling prices continued to increase steadily,
with prices reaching a high of approximately $0.42 per pound with strong volumes
and profit margins. During the summer months, however, the demand for PVC resins
declined significantly as customers took steps to control their inventory levels
and due to seasonal customer plant shutdowns. Demand for PVC resins continued to
be soft in the fourth quarter of 2000 and into the first half of 2001 as general
economic conditions weakened the demand for construction and automotive
applications. As a result, selling prices for PVC resins decreased every month
over the second half of 2000 and continued to decline over the first half of
2001. When combined with lower sales volumes due to decreased demand and
increased raw material and energy costs due to the significant increases in the
cost of natural gas, the Operating Partnership incurred negative profit margins
from PVC Products over the second half 2000, and the first half of 2001.

Results of Operations

Quarter Ended June 30, 2001 Compared to Quarter Ended June 30, 2000

Revenues

Total revenues from continuing operations during the second quarter of 2001
decreased $46.4 million or 33.2% to $93.3 million from $139.7 million in the
second quarter of 2000. Total revenues for PVC Polymers Products decreased as a
result of an 18.8% decrease in average selling prices, and a 17.7% decrease in
sales volumes.

Cost of Goods Sold

Total cost of goods sold from continuing operations decreased $16.3 million to
$100.3 million in the second quarter of 2001 from $116.6 million in the same
period last year. Expressed as a percent of revenue, cost of goods sold was
107.4% in the current year versus 83.5% in the prior year. The increase was due
to price increases in all major raw materials.

As a result of the changes in revenues and cost of goods sold, the contributing
margin from continuing operations declined to a negative margin of $6.9 million
in the second quarter of 2001 from a positive margin of $23.1 million for the
same quarter of 2000.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses decreased $1.0 million to $5.4
million in the second quarter of 2001 compared to $6.4 million in 2000. This
decrease was primarily due to a reduction in salaries and contract labor.

Impairment of long-lived assets

The asset impairment income represents the reversal of amounts accrued during
the 4th quarter 2000 for estimated losses on purchase commitments for capital
projects associated with the idlement and impairment of the Company's
acetylene-based VCM plant and related assets.

Interest Expense

Interest expense for the second quarter of 2001 decreased $5.0 million, which is
the result of the bankruptcy proceedings which preclude interest charges on the
unsecured Subordinated Notes. Interest expense has been recorded for the first
quarter of 2001. However, contractual interest charges of $4.6 million on the
Subordinated Notes for the period after the bankruptcy filing, which are not
expected to be paid, have not been recorded.

Tax on Gross Margin

No current gross margin tax expense has been incurred or recognized during 2001
as the Partnership does not have taxable income for 2001 due to the losses
incurred.

Other Income and Expense

Other expense during the second quarter of 2001 was $3.0 million as compared to
income of $0.2 million for the same period last year. This increase was largely
due to severance payments made as part of management's initiative to reduce the
labor force and provisions for sales tax assessments received during fiscal
2001.

Reorganization Items

Professional fees during the second quarter of 2001 related to the
reorganization proceedings were $2.5 million compared to no expense last year.
The loss on debt issuance costs of $3.8 million represents a write off of
pre-petition debt issuance costs. The gain on settlement of pre-petition claims
in 2001 of $0.4 million represents court-approved settlement of certain
pre-petition liabilities.

Net Loss from Continuing Operations

Net loss for the second quarter of 2001 was $23.2 million compared to income of
$8.7 million for the same period in 2000. As discussed above, the primary
reasons for the $31.9 million decrease from prior year was the result of
decreased sales volume, increased raw materials costs and severance costs.

Loss from Discontinued Operations

The Operating Partnership exited the Methanol and Derivatives and the Nitrogen
Products business in 2000, and its revenues are now derived principally from the
sale of PVC resins. A net loss from discontinued operations of $5.6 million was
incurred for the second quarter of 2000. Depressed selling prices for Methanol,
Ammonia and Urea caused the continued losses from the discontinued businesses. A
net gain of $5.0 million was recognized during the second quarter of 2000 on the
sale of the Operating Partnership's formaldehyde and related assets.

Results of Operations
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Revenues

Total revenues from continuing operations during the first half of 2001
decreased $85.4 million or 30.5% to $194.8 million from $280.2 million in the
first half of 2000. Total revenues for PVC Polymers Products decreased as a
result of a 21% decrease in average selling prices, and a 12% decrease in sales
volumes. Selling prices and volume decreases are the result of a decreased
demand in the marketplace.

Cost of Goods Sold

Total cost of goods sold from continuing operations decreased $14.7 million to
$221.8 million in the first half of 2001 from $236.5 in the same period last
year. Expressed as a percent of revenue, cost of goods sold was 113.9% in the
current year versus 84.4% in the prior year. The increase was due to price
increases in all major raw materials and lower sales volumes over which to
spread fixed operating costs.

As a result of changes in revenues and cost of goods sold, the contributing
margin from continuing operations decreased by $70.7 million to a negative
margin of $27.0 million in the first half of 2001 from a positive margin of
$43.7 million in 2000. The decrease was primarily due to a reduction in salaries
and contract labor.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses decreased $1.8 million to $11.8
million in the first half of 2001 compared to $13.6 million 2000. This decrease
was primarily due to reduction in salaries and contract labor.

Impairment of long-lived assets

Interest Expense

Interest expense for the first half of 2001 decreased $5.8 million which is the
result of lower interest rates under the Revolving Credit Facility during 2001,
the write-off of debt issuance costs in the first quarter of 2001 and the
bankruptcy proceedings which preclude interest charges on the unsecured
Subordinated Notes. Interest expense has been recorded for the first quarter of
2001. However, contractual interest charges of $4.6 million on the Subordinated
Notes for the period after the bankruptcy filing, which are not expected to be
paid, have not been recorded.

Tax on Gross Margin

No current gross margin tax expense has been incurred or recognized during 2001
as the Partnership does not have taxable income for 2001 due to the losses
incurred.

Other Income and Expense

Other expense during the first half of 2001 was $6.0 million as compared to
income of $0.2 million for the same period last year. This increase was largely
due to severance payments of $2.9 million and provisions for sales tax
assessments of $2.5 million, offset by a reduction in other income.

Reorganization Items

Professional fees during the first half of 2001 related to the reorganization
proceedings were $3.6 million compared to no expense last year. In the second
quarter, in accordance with SOP 90-7, the Company wrote off debt issuance costs
of $3.8 million associated with the Subordinated Notes as a result of the
bankruptcy proceeding. The gain on settlement of pre-petition claims in 2001 of
$0.4 million represents court-approved settlement of certain pre-petition
liabilities.

Net Loss from Continuing Operations

Net loss for the first half of 2001 was $60.6 million compared to income of
$13.7 million for the first half of 2000. As discussed above, the primary
reasons for the $74.3 million decrease from prior year was the result of the
second quarter asset impairment and decreased volume and selling prices from PVC
Products.

Loss from Discontinued Operations

The Operating Partnership exited the Methanol and Derivatives and the Nitrogen
Products business in 2000, and its revenues are now derived principally from the
sale of PVC resins. A net loss from discontinued operations of $10.2 million was
incurred for the first half of 2000. Depressed selling prices for Methanol,
Ammonia and Urea caused the continued losses from the discontinued businesses. A
net gain of $5.0 million was recognized during the first half of 2000 on the
sale of the Partnership's formaldehyde and related assets.

Liquidity and Capital Resources

Cash Flows from Operations

Cash used in operations for the first half of 2001 totaled $4.9 million
compared to $5.5 million in 2000, primarily due to a net loss of $60.6 million,
offset by favorable changes in receivables and inventories.

Cash Flows from Investing Activities

First half capital expenditures totaled $4.7 million for 2001 compared to $4.6
million in 2000. The Operating Partnership had a 50% interest in a 200 million
pound stated annual capacity acetylene plant at the Geismar complex, with the
remaining 50% interest held by BASF Corporation. The Operating Partnership
purchased BASF's interest in the acetylene plant in January 2000 for $15.9
million, $8.2 million of which was paid in the first quarter 2000 and the
remaining balance was paid in July 2000. Proceeds from a note receivable from
the sale of the formaldehyde business of $9.7 million were collected in the
first quarter of 2001.

Cash Flows from Financing Activities

Net long-term repayments were $1.2 million in the first half of 2001 compared to
borrowings of $23.1 million in the first half of 2000. A decrease of $69.1
million in net income from prior year was offset by favorable increases in
capital expenditures and plant acquisitions of $8.0 million and a $1.4 million
debt issuance cost payment in first quarter 2001.

Liquidity

On April 3, 2001, the Debtors commenced the Operating Partnership Chapter 11
case. The Debtors are currently acting as debtors-in-possession pursuant to the
Bankruptcy Code.

Subsequent to the commencement of the Operating Partnership Chapter 11 case, the
Debtors sought and obtained several orders from the Bankruptcy Court which were
intended to stabilize and continue business operations. The most significant of
these orders (i) approved an amendment (the "Primary DIP Facility") to the
prepetition Year 2000 Revolving Credit Facility (the "Prepetition Credit
Facility") providing up to $100 million of debtor-in-possession financing, (ii)
permitted continued operation of the consolidated cash management system during
the Operating Partnership Chapter 11 case in substantially the same manner as it
was operated prior to the commencement of the Operating Partnership Chapter 11
case, (iii) authorized payment of pre-petition wages, vacation pay and employee
benefits and reimbursement of employee business expenses, and (iv) authorized
payment of pre-petition obligations to certain vendors critical to the Operating
Partnership's ability to continue its operations.

The Primary DIP Facility, which received final Approval of the Bankruptcy Court
on July 11, 2001, provided the Operating Partnership with a revolving line of
credit in an aggregate amount not to exceed $100 million, subject to borrowing
base limitations. The Operating Partnership has used amounts borrowed under the
Primary DIP Facility for its ongoing working capital needs and for certain other
purposes of the Operating Partnership as permitted by that facility. The
Operating Partnership granted a security interest to the DIP Lenders in
substantially all of the Operating Partnership's assets as security for its
obligations under the Primary DIP Facility. All obligations under the Primary
DIP Facility are afforded "super-priority" administrative expense status in the
Operating Partnership Chapter 11 case. The Primary DIP Facility matured on March
31, 2002, but the lenders have agreed, and the Bankruptcy Court has approved,
the extension of the maturity date to April 30, 2002.

In light of the possibility that the Primary DIP Facility would be insufficient
to finance the Operating Partnership's working capital needs during the period
required to obtain confirmation of a plan of reorganization for the Debtors, the
Operating Partnership approached a number of institutional lenders to assess
their interest in extending additional credit to the Debtors. None of these
lenders were willing to provide credit or terms acceptable to the Operating
Partnership. The Operating Partnership requested its general partner, BCPM, to
provide a loan to it. On October 31, 2001, the Debtors filed an initial motion
with the Bankruptcy Court seeking an interim order to obtain additional,
secondary postpetition financing (the "Secondary DIP Facility") from BCPM. The
terms of the proposed Secondary DIP Facility were negotiated, on the one hand,
by management of the Operating Partnership and the Debtors' legal counsel and,
on the other hand, by officers of BCPM and BCPM's legal counsel, with the
approval of the Independent Committee of the Board of Directors of BCPM which is
comprised of three outside directors who are not employees of the Operating
Partnership, BCPM or its affiliates. The negotiations included efforts to obtain
the support of the lenders under the Primary DIP Facility and the Official
Committee of Unsecured Creditors appointed in the Operating Partnership Chapter
11 case. The Creditors Committee filed an objection to the initial motion on
November 6, 2001.

Further negotiations between the Operating Partnership and BCPM occurred, and
the parties agreed to revisions to the terms of the proposed Secondary DIP
Facility. The Debtors sought interim approval of the revised Secondary DIP
Facility. Subject to the terms and conditions of the Secondary DIP Facility,
BCPM has agreed to makes loans to the Operating Partnership through March 31,
2002, in an aggregate amount not to exceed $10 million for working capital,
other general corporate purposes and to make payments on the Primary DIP
Facility. The loans are unsecured, bear interest at the Alternate Base Rate
specified in the Primary DIP Facility plus 2.75% and mature on March 31, 2002.
The Creditors Committee also objected to the revised Secondary DIP Facility.
After a hearing, the Bankruptcy Court entered an order on December 20, 2001,
granting interim approval to $5 million in loans under the Secondary DIP
Facility. In 2002, the Operating Partnership has had to make borrowings under
the Secondary Facility which amounts have been subsequently repaid.

On May 1, 1995, the Operating Partnership issued $200 million aggregate
principal amount of 9.5% Notes due 2005 (the "Notes") pursuant to an Indenture
dated as of May 1, 1995. The Notes are senior unsecured obligations of the
Operating Partnership and are non-recourse to the Company, BCPM and its
affiliates. As a result of the filing of the Operating Partnership Chapter 11
case, no principal or interest payments will be made on any pre-petition debt,
including the Notes, except as approved by the Bankruptcy Court.

Management has undertaken several other initiatives to improve liquidity,
including idling unprofitable or high cost assets and production facilities,
wage freezes and reductions-in-force. However, given current business and market
conditions and the financial condition of the Debtors, there can be no assurance
that the Operating Partnership will be able to meet its financial obligations in
the future. At this time sales of Operating Partnership assets are not expected
to generate enough cash to make a distribution to unit holders of the Company or
to satisfy all of the Operating Partnership's debts.

Capital Expenditures

The Partnership currently believes that the level of annual base capital
expenditures for 2001 are expected to be approximately $12 million with the
expenditures to be mainly for required environmental, safety and other
non-discretionary projects. This estimate reflects limitations placed on capital
expenditures by the DIP Loan Agreement.

Item 2-A Market Risk
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Interest Rate Risk - The DIP Loan Agreement provides up to $100 million under a
revolving credit agreement with Fleet Capital Corporation. The DIP Loan
Agreement will terminate upon the earlier of consummation of a plan of
reorganization in Chapter 11 Cases, or April 30, 2002, at which time all amounts
outstanding must be repaid. Interest on borrowings under the revolving credit
facility is determined, at the Operating Partnership's option, either at LIBOR
plus 3% or Base Rate plus 1.25%. At June 30, 2001, borrowings under the facility
were $71.2 million and bore interest at 8.1%.

The Partnership is exposed to swings in the LIBOR or Base rates. A change of
1.00% in the applicable rate would change the Partnership's annual interest cost
by approximately $0.7 million based on the borrowings at June 30, 2001.

Commodity Risk - The Partnership generally does not use derivatives or other
financial instruments such as futures contracts to manage commodity market risk.
The Partnership has entered into a fifteen-year supply agreement (commencing in
1997) to provide a long-term supply of ethylene, a raw material, and minimize
price volatility. The purchase price for the product varies with the supplier's
raw material and variable costs, which are market-driven, as well as its fixed
costs. The Partnership evaluates all such contracts on the basis of whether
committed costs are expected to be realized in light of current and expected
selling prices when the commodities are consumed in manufactured products.

Foreign Exchange and Equity Risk

The Partnership is not exposed to significant foreign exchange or equity market
risk.

Forward-Looking Statements

Certain statements in this Form 10-Q are forward-looking. These can be
identified by the use of forward-looking words or phrases such as "believe",
"expect", "may" and "potential", among others and include statements regarding
the business outlook for the Operating Partnership and its ability to fund its
cash needs. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for such forward-looking statements. While these forward-looking
statements are based on the Partnership's reasonable current expectations, a
variety of risks uncertainties and other factors, including many which are
outside the control of the Partnership, could cause the Partnership's actual
results to differ materially from the anticipated results or expectations
expressed in such forward-looking statements. The risks, uncertainties and other
factors that may affect the operations, performance, development and results of
the Partnership include changes in the demand for and pricing of its commodity
products, changes in industry production capacity, changes in the supply of and
costs of natural gas and other significant raw materials, loss of business from
major customers, continuing availability of post-petition financing, negative
market and credit impact from the Chapter 11 filings, unanticipated expenses,
substantial changes in financial markets, labor unrest, foreign competition,
major equipment failure, unanticipated results in pending legal proceedings,
changes in applicable environmental, health and safety laws and regulations.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
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There have been no material developments in the ongoing legal proceedings that
are discussed in the Partnership's 2000 Annual Report on Form 10-K.

The Partnership is subject to legal proceedings and claims that may arise in the
ordinary course of business. The management of the Partnership believes, based
on the information it currently possesses, that the amount of ultimate
liability, taking into account its insurance coverage, including its risk
retention program and Environmental Indemnity Agreement with Borden, is unlikely
to have a material adverse effect on the financial position or results of
operations of the Partnership.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

BORDEN CHEMICALS AND PLASTICS
LIMITED PARTNERSHIP
By BCP Management, Inc.,
its General Partner

By: /s/ Robert R. Whitlow, Jr.
---------------------------------------
Robert R. Whitlow, Jr.
Chief Financial Officer and Treasurer

April 15, 2002