Latin American Petrochemical Giant Braskem Advances Debt Restructuring, Requests Creditors Extend Maturity

Brazilian petrochemical company Braskem’s financial restructuring has entered a critical stage. The company has initiated a mediation process with creditors and applied for judicial protection with a local court in São Paulo, seeking to complete the renegotiation of its capital structure by the end of 2027. During this period, the company needs to repay debt principal and interest totaling USD 3.69 billion, equivalent to approximately BRL 20.3 billion at the current exchange rate.

The leading Latin American petrochemical company has simultaneously made public the restructuring confidential documents that were previously disclosed only to the ad hoc group of creditors. The documents reveal the core plan of this restructuring: only extending the debt maturity period, without implementing principal write-downs, debt-to-equity swaps, or requiring creditors to make immediate new loans. Braskem indicated that supplier, customer, and other operating payables are not included in this restructuring.

The initiation of this restructuring comes just a few weeks after the change in Braskem's equity ownership. Investment firm IG4 Capital has replaced Novonor and become a joint controlling shareholder alongside Petrobras (B3: PETR4; NYSE: PBR), taking on the highly challenging balance sheet issues in the industry. This debt restructuring also marks the first major test for the new holding structure.

A wave of debt maturities is coming due, while the industry's recovery is lagging behind the debt repayment schedule.

Debt repayment pressure will concentrate in the short term: the principal and interest on debts maturing in the third quarter of 2026 will reach $878 million, including $572 million in working capital credit, $188 million in various bonds and corporate bonds, and $118 million in bilateral and export credit debt.

The largest debt maturity is due in January 2028, amounting to approximately USD 1.33 billion, primarily related to Braskem’s 2028 bonds.

The proposal does not include principal reduction and rejects debt-to-equity conversion.

Braskem’s proposed restructuring plan breaks with the industry’s traditional approach to workouts. Management has proposed pursuing an out-of-court restructuring under Brazilian law, providing equal treatment to unsecured financial creditors; preserving core liquidity facilities without adding fixed-asset collateral and maintaining the unsecured status of existing debt; and carrying out the process without any principal haircut, debt-for-equity swap, or requirement for creditors to provide immediate new funding.

Internal forecasts indicate that petrochemical product spreads will gradually recover before 2035, driving continued improvements in EBITDA, profitability, and cash flow. The company’s revenue is expected to increase from USD 12.3 billion in 2025 to USD 20.7 billion in 2035, while EBITDA is projected to rise from USD 0.5 billion to USD 3.0 billion over the same period.

Braskem also noted that the above projections do not constitute official earnings guidance and are intended solely for reference in the restructuring negotiations. Actual results will depend on multiple variables, including petrochemical product spreads, feedstock costs, operating expenses, plant utilization rates, and market conditions.

The creditors have not yet reached a consensus.

Latest disclosed documents show that the negotiations between the two sides have been difficult. Braskem and the creditors signed a confidentiality agreement on June 11, after which they exchanged restructuring proposals and held in-person meetings. The company hopes to leverage out-of-court judicial protection mechanisms to accelerate the negotiations and is urging the creditors to respond as soon as possible.

Braskem hopes to safeguard normal production and operations and preserve shareholder value through an orderly restructuring, while creditors may require stronger debt protection, higher compensation for risk, or additional risk-control provisions before agreeing to defer debt repayment. At this stage, the company is the direct beneficiary of this judicial protection, gaining sufficient time for negotiation; supplier and customer cooperation contracts will not be affected by the restructuring process.