Braskem’s long crossing

Braskem faces a long crossing. Burdened with debt, Brazil’s largest petrochemical group must generate cash to survive the decade intact. Investor confidence is thin. The company is worth just R$5.7 billion ($1.1bn) on the B3, its lowest level since 2009. Net debt stands at more than 10 times Ebitda.

The core problem is the absence of a controlling shareholder. Its former backer was jailed during Brazil’s Lava Jato corruption probe a decade ago, leaving Braskem adrift and entangled in creditor disputes. In the rear-view mirror, there are achievements: the group became the world’s sixth-largest petrochemical producer, with more than 40 plants across four countries. But mistakes piled up — corruption scandals, destructive salt mining in Alagoas, and lavish spending during boom years.

The past now weighs heavily. The petrochemical cycle has turned against producers. Even global investment-grade peers such as Dow, Lyondell and Sabic are struggling with squeezed margins. Supply far outstrips demand. China and the Middle East keep adding capacity while global consumption falters. Oil majors are cutting spending and tightening terms for clients.

Braskem still has cash on hand, and its biggest amortisation falls only in 2028 — a breathing space. Yet confidence has crumbled. Rating agencies have downgraded the group, citing weak liquidity prospects as cash burns. Tax breaks could buy time, but would only defer the pain. Advisers have been hired to overhaul the capital structure.

The Mexican subsidiary is tied to banks that financed its project. Shares in the parent are pledged to creditors of Odebrecht, the indebted holding company. Braskem has been on the block for nearly a decade, with no takers — Lyondell backed away amid uncertainty over Alagoas liabilities.

Since then, creditor banks have searched for a market solution. None has advanced. The cheque is too large. One option is to carve up the company and sell assets piecemeal. Another is a return to Petrobras, its main supplier of naphtha and a significant shareholder. For the state-controlled oil group, that would mean rescuing a key client — but at the cost of crowding out other investments and carrying political baggage.

On Braskem’s long crossing, the worst outcome would be for the lifeboat never to arrive.