Brazil’s Braskem Files For Extrajudicial Recovery On US$10.9 Billion Debt

Brazil's petrochemical company, Braskem, has filed for extrajudicial recovery to restructure its financial debt of approximately US$10.9 billion (R$56.1 billion). This form of debt restructuring occurs outside of court and involves a negotiated plan presented to creditors, which is then homologated by a court if approved. The current plan does not include restructuring debts to suppliers or customers, and there are no plans for asset sales or a share offering at this time.

The extrajudicial recovery process is distinct from Chapter 11 bankruptcy in the United States, which is a formal court process. Braskem's extrajudicial recovery is separate from a Chapter 11 case involving Braskem Idesa, a joint venture in Mexico. The company has received creditor support of around a third, though this figure is not confirmed by Braskem and should be treated with caution.

Investors should monitor the extrajudicial recovery separately from the Mexican Chapter 11 case, as they follow different timelines and have different implications. The extrajudicial process is generally faster and more negotiated, but it requires creditor cooperation. The company has not set a timeline for the next steps, and asset sales or equity offerings are not currently part of the plan.

The restructuring reflects broader economic pressures in Brazil, such as high inflation and interest rates, but the negotiated extrajudicial path suggests creditors are willing to negotiate, avoiding a full-blown bankruptcy process.