By Brazil Stock Guide – Braskem Idesa, the Mexican joint venture of Braskem S.A. (B3: BRKM3, BRKM5, BRKM6; NYSE: BAK; Latibex: XBRK), entered default after failing to pay the interest due on November 18 on its guaranteed senior notes maturing in 2029. The securities carry $900 million in outstanding principal, and the company confirmed the non-payment in a Wednesday filing, saying it is deepening negotiations with an ad-hoc group of bondholders to pursue a “sustainable” capital structure and safeguard operations.
The missed payment constitutes a coupon default, the most common form of default in global bond markets. Bloomberg reported that the coupon due amounted to $33.5 million, underscoring the scale of the liquidity shortfall that pushed the issuer into default. Even when an indenture allows for a grace period before the default becomes formalized, markets and rating agencies treat a missed payment on the due date as default, given the immediate signal of financial stress.
Braskem Idesa was financed through a major project-finance package to build the Etileno XXI petrochemical complex in Veracruz, inaugurated in 2016. The facility integrates ethane cracking and polyethylene production and supplies most of Mexico’s domestic PE market. But repeated feedstock restrictions from state-owned Pemex, lower utilization rates and weaker petrochemical spreads eroded cash flow and left liquidity insufficient to cover the November coupon.
The 2029 bonds had already collapsed to about 60 cents on the dollar, with yields near 24%, reflecting investor expectations of imminent default. Fitch and S&P downgraded the venture to deep-distressed territory in recent weeks, citing weakening liquidity and no credible path to honor near-term obligations. To navigate the situation, Braskem Idesa hired Lazard, Cleary Gottlieb and Sainz Abogados to review restructuring options.
Although the JV’s debt is structurally separate from Braskem S.A.’s consolidated balance sheet in Brazil, the default increases scrutiny on the parent company, which is also contending with compressed margins and rating-agency caution. Braskem said it will continue to update the market, but with the coupon unpaid and the issuer now in default, a formal restructuring has become the base-case scenario for stabilizing the Mexican asset.
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