Braskem, the struggling petrochemical producer, is facing an August 24 deadline to secure a restructuring agreement and avoid filing for bankruptcy protection. Creditors, including bondholders, are urging state-owned oil giant Petrobras, a major shareholder, to inject fresh capital, potentially as equity, working capital, or junior debt, to support the restructuring efforts. Negotiations have intensified, but the parties remain far apart on key terms.
Petrobras, while unwilling to provide a direct loan or take on new financial debt, is reportedly considering offering supply concessions. This could involve extending payment terms for naphtha purchases, which Braskem currently pays for upfront. Such a move would help Braskem preserve cash and address creditors' demands for meaningful shareholder contributions. However, an industry source noted that changing Petrobras's strict payment terms, typically 14 days or even upfront for distressed companies, could set an unwelcome precedent for its other commercial relationships.
Braskem has proposed a restructuring plan that includes a five-year grace period for principal repayment and a 2.5-year grace period for interest, which creditors have rejected. Some bondholders, who acquired Braskem bonds in the secondary market, offered $750 million in financing secured by Braskem's assets, contingent on the funds being used for interest payments; this counterproposal was rejected by the company. The immediate goal is to secure support from at least one-third of creditors to file for an out-of-court restructuring and gain a 90-day injunction to continue negotiations. Creditors are also demanding "guardrails," such as a ban on dividend payments and limits on M&A, to protect the company's cash and assets during the restructuring period.
Despite an improvement in operating performance in Q2, which temporarily reduced financial leverage from 18.18 times to 6.74 times (net debt to EBITDA), Braskem still faces significant debt, with $10.3 billion in consolidated gross debt and approximately $1 billion in cash. Shareholder IG4 Capital, which recently assumed joint control with Petrobras, is leading the negotiations. There is a general consensus among the company and its shareholders that Braskem has no capacity for additional debt, and a capital injection would dilute existing shareholders without significant benefit. Petrobras is also reportedly unwilling to increase its stake due to potential consolidation of Braskem's liabilities.
