SAO PAULO: Braskem’s creditors and shareholders are moving closer to a deal to rework some US$11bil of debt, according to people familiar to the matter.
Proposals from both the petrochemical company and creditors envisage a follow-on equity offering with a capital injection from main shareholders and third parties and a simultaneous debt-to-equity swap by creditors, according to documents on the negotiations released last Saturday.
The initial capital injection by shareholders and the creditor’s debt-to-equity swap would be about US$4bil under the creditors’ proposal and about US$5bil under Braskem’s proposal, the documents show.
That’s the closest to a deal that the two sides have ever been during talks on an out-of-court restructuring, one of the people said, asking not to be named because conversations are private.
While the sides have made progress, significant differences remain in the proposals and a deal isn’t guaranteed, the people said.
In the company’s proposal, creditors would convert US$2.8bil in equity, while shareholders and third parties would commit to inject US$1.2bil in a US$2.25bil follow-on offering probably this year, the documents show.
If needed to achieve certain metrics, shareholders would do an additional injection of as much as US$500mil and creditors would contribute as much as US$1.5bil in capital and debt conversion in June 2029.
Creditors agree to a follow-on capital injection of US$2.25bil, but suggested that US$1.85bil should be backstopped by the main shareholders or third parties, as long as the commitment is provided now.
Any third party other than the main shareholders that may provide backstop commitments will be subject to creditor approval prior to plan approval, they said.
Creditors also proposed an upfront debt-to-equity conversion of US$1.85bil with a commitment of more US$450mil in June 2029 if necessary.
In the company’s proposal, Petrobras and IG4 Capital Group would maintain control and management of Braskem.
Braskem said it remains in negotiations with creditors regarding its out-of-court restructuring process and declined to comment further.
Talks are continuing and many details still need to be sorted out, the people said. While both sides have until Nov 22 to reach an agreement, there’s an expectation that would happen sooner, according to the people.
Braskem filed for an out-of-court restructuring in August. A framework laid out in court documents at the time included a commitment by the main shareholders or agreed third parties to provide or backstop fresh equity after a so-called relief period, though the amount, structure and timing remained open.
Since then, the company and a group of bondholders have been engaged in intense negotiations to come up with a final restructuring plan and avert a bankruptcy filing. Previously, bondholders asked controllers Petrobras and IG4 Capital Group for US$3bil in fresh capital, which has been rejected by shareholders. — Bloomberg
