A São Paulo court has accepted Braskem's request for out-of-court reorganization, a procedure under Brazilian law that lets a company renegotiate debt with creditors while keeping a lighter judicial footprint than full bankruptcy protection. The petrochemical company, the largest in Latin America, is seeking to restructure US$ 10.9 billion in financial debt, roughly R$ 56.3 billion. The ruling by the 2nd Bankruptcy and Judicial Recovery Court of São Paulo, disclosed by the company on Friday (28), confirmed a 120-day suspension of all enforcement actions brought by creditors covered by the plan, according to Folha de S.Paulo. The period already discounts 60 days granted under an earlier injunction.
The request was filed on August 24 with a strictly financial scope, leaving suppliers and other operational creditors out. According to Veja magazine, Braskem entered the process with creditors representing 39.6% of claims already on board and has a 90-day window to broaden that support and present a definitive plan. The initial design gives the company two and a half years of relief on interest payments and pushes principal amortization beyond the fifth year. The company also said, per Folha, that the final plan may include converting part of the debt into equity and that its main shareholders, IG4 and state-run oil company Petrobras, could provide liquidity support if needed.
Foreign fronts pressure the plan
The reorganization runs in parallel with disputes abroad. In the United States, funds linked to Bracebridge Capital are challenging the inclusion of Braskem America Finance, a Delaware-registered entity, in the Chapter 15 proceeding that enforces the Brazilian protection on US soil. The Finance unit accounts for about US$ 589 million in bonds, of which only 13.2% joined the plan, according to Veja. The plan states that if one of the debtors faces an involuntary insolvency proceeding in another jurisdiction and Braskem fails to suspend it within 20 business days, the episode can become a resolution event for the whole restructuring.
In Texas, Mexican subsidiary Idesa is already in Chapter 11. Before that, Braskem hired investment bank Lazard to seek financing and approached 20 potential funders without receiving a workable proposal. The solution came from its own pocket: up to US$ 350 million for the Mexican operation, according to Veja.
Investment firm IG4 took control of Braskem inheriting Latin America's biggest petrochemical producer, its multibillion-dollar debt and a long-running crisis. The company is also still paying for the Maceió disaster in northeastern Brazil, where decades of salt extraction caused entire neighborhoods to sink and forced the relocation of thousands of residents, along with multibillion-real compensation agreements.
For suppliers and plastics-chain customers, the design of the process limits the near-term practical effect: because the scope is strictly financial, industrial operations continue normally and resin output, the raw material on which packaging manufacturers and converters across Brazil depend, is unaffected. For consumers, any impact would be indirect and would hinge on the restructuring succeeding in the coming months, when creditors decide whether to join the definitive plan.