By Brazil Stock Guide – Braskem is entering the most critical phase of its restructuring, with a 90-day deadline to broaden creditor support for its Brazilian plan and a U.S. court hearing in December to recognize the proceeding under Chapter 15.
The company filed for an out-of-court restructuring on Aug. 24 with the support of creditors representing 39.6% of roughly $10.9 billion in unsecured financial claims. Under Brazilian law, Braskem has 90 days from the filing date to secure the creditor backing required for an updated plan, putting the deadline at around Nov. 22.
The plan filed in August is essentially a standstill framework, designed to give Braskem, its main shareholders — Petrobras and IG4 — and financial creditors time to negotiate a definitive restructuring. Key issues still under discussion include maturity extensions, fresh capital, additional collateral and a potential debt-to-equity conversion.
In the United States, the U.S. Bankruptcy Court for the Southern District of New York formalized the timetable for Braskem’s Chapter 15 proceeding on Sept. 1. Judge Michael E. Wiles scheduled a pretrial conference for Dec. 7 and the recognition hearing for Dec. 8.
Parties seeking to oppose recognition of the Brazilian proceeding have until Nov. 20 to file objections, while Braskem has until Dec. 3 to respond.
Chapter 15 allows a U.S. court to recognize and give effect to a restructuring proceeding conducted in another jurisdiction. For Braskem, that protection is particularly relevant given the large share of international bonds in its capital structure.
Some creditors have previously raised questions over the inclusion of certain subsidiaries, particularly Braskem America Finance, in the U.S. proceeding. Those concerns are not new and, so far, have not developed into a broader challenge to Braskem’s Brazilian restructuring as a whole.
The U.S. court has already granted and subsequently extended provisional relief while the recognition request is being considered. The December timetable adds an important legal layer to the process, but the more immediate economic test remains in Brazil.
By late November, Braskem will need to turn its initial 39.6% creditor support into the majority required for a definitive restructuring plan capable of binding the affected claims.
By the time the New York hearing begins in December, Braskem should have a much clearer picture of whether it has secured enough creditor support to complete its restructuring in Brazil.
Leave a Reply