By Brazil Stock Guide – A São Paulo court sided with a group of Braskem SA creditors and halted new funding steps tied to the restructuring of Braskem Idesa, while appointing a judicial administrator to oversee the Brazilian petrochemical producer’s out-of-court restructuring.
Judge Tainá Maria Leonardo de Oliveira, of São Paulo’s 2nd Bankruptcy and Judicial Reorganization Court, ordered Braskem (BRKM5 BZ) and its subsidiaries on Thursday to refrain from carrying out further extraordinary asset-related measures under the transaction known as Operation BAKIDE.
The ruling expands judicial scrutiny over the restructuring of Braskem Idesa, the company’s Mexican unit, which is undergoing Chapter 11 proceedings in the US. The creditors challenging the transaction include holders of Braskem debentures and bonds issued in international markets.
They argue that the transaction could expose Braskem to as much as $800 million and that they were not given sufficient information about its terms.
Braskem Idesa has already drawn about $230 million from a $415 million debtor-in-possession financing facility, while parent company Braskem has injected another $49 million, according to information presented in the proceedings.
Court-Ordered Oversight
The court appointed ACFB Administração Judicial to monitor Braskem’s out-of-court restructuring and gave the firm 15 days to submit a detailed work plan.
The judge also ordered IG4 Capital and Petroleo Brasileiro SA, or Petrobras (PETR4 BZ), to provide additional information about the transaction involving Braskem Idesa.
Braskem did not comment on the ruling after being contacted, according to the original report.
Braskem’s preferred shares trade on B3 under BRKM5, while Petrobras’ preferred shares trade under PETR4.
The court dispute comes as Braskem’s shareholders and creditors negotiate the terms of a broader restructuring.
Creditors are seeking a $3 billion capital injection from the company’s shareholders during the first two years of a potential restructuring plan, equivalent to roughly R$15.5 billion.
Petrobras owns 47% of Braskem’s voting capital. IG4 controls 50.1% after taking over shares previously held by Novonor that had been pledged to creditor banks.
According to Folha de S.Paulo’s C-Level, shareholders were expected to formally discuss the creditors’ proposal on Friday and reject its current terms. Petrobras and IG4 were preparing an alternative proposal focused on a longer restructuring period and operational measures designed to improve profitability.
Braskem’s debt is estimated at about $11 billion, or roughly R$55 billion. Creditors are seeking to recover part of their exposure over a shorter period, while shareholders favor a restructuring stretched over a longer time frame.
Petrobras Rules Out Solo Cash Injection
Petrobras Chief Executive Officer Magda Chambriard said Thursday that the state-controlled oil producer does not intend to increase its financial exposure to Braskem on its own and reiterated that the company is not seeking to renationalize the petrochemical producer.
“Increasing our stake [in Braskem] is not within our scope, and therefore there is no reason to talk about Petrobras injecting funds without talking about shareholders in general injecting funds,” Chambriard said in an interview in Rio de Janeiro.
Leave a Reply