BREAKING: Braskem entra em recuperação extrajudicial e ganha 90 dias contra uma RJ

Braskem has entered into extrajudicial recovery proceedings to attempt an agreement with banks, bondholders, and shareholders on restructuring a debt of approximately R$ 54 billion. The RE, following an agreement with creditors, grants the company 90 days of protection against executions and removes the risk of judicial recovery for now.

The protective measure, which previously suspended debt execution for 60 days, has now expired. The request received the support of more than a third of the creditors - enough to grant the company protection while negotiating a definitive plan. Now begins the most challenging part: reaching a definitive plan for a capital structure acceptable to groups with very different interests and views on how much money Braskem needs - and who should bear the cost.

The major creditors are bondholders and banks Banco do Brasil, BNDES, Itaú Unibanco, Bradesco, and Santander. The decision to file the RE came after weeks of negotiations in which creditors threatened to take Braskem to judicial recovery if there was no definitive plan or commitment from Petrobras to inject money into the company.

With the end of the protective period approaching, the parties concluded that it would be impossible to negotiate a definitive plan in such a short time. Sources close to the company believe that recent discussions have already advanced some points of the plan, allowing Braskem to start the RE with part of the negotiations prioritized - even though an agreement is far from guaranteed.

There are divisions on four main points: the need and size of a new cash injection; an eventual conversion of debt into shares, diluting current shareholders; the guarantees offered to creditors; and the conditions for extending the debt. The gap between the parties remains significant. One source told Brazil Journal that banks advocate a design based more on extending the debt and have even questioned the need for a large cash injection.

Some bondholders, such as distressed asset funds Contrarian and Elliott, press for capitalization of up to US$ 4 billion with Petrobras participation, plus more guarantees and debt conversion into shares. Braskem and its main shareholders - Petrobras and IG4 - are not comfortable with either design. According to the source, everyone ultimately gave in to facilitate the RE.

Petrobras and IG4 agreed to include in the negotiation framework the possibility of future capital increase if Braskem needs new money. The creditors sought an immediate commitment, but only managed to leave the discussion of potential capitalization in the definitive plan open for future debate. One of the alternatives discussed is first to extend the debt and leave the decision on capitalization for later when there is more visibility on Braskem's cash needs.

The move comes just days after Braskem Idesa, the joint venture of the company with Mexican group Idesa, filed for Chapter 11 in the United States. Braskem Idesa has already reached recovery with a restructuring agreement hammered out with creditors and shareholders. The plan foresees reducing senior debt of about US$ 2.5 billion to US$ 1.6 billion.

Braskem will inject US$ 476 million into the subsidiary and will remain its majority shareholder. However, a discussion that remains is how to finance the investment in the Mexican operation without harming Braskem's creditors - an issue for the next 90 days. Braskem's shares have fallen 42% over the past 12 months. The company is worth R$ 3.6 billion on the stock exchange.