Braskem is considering requesting extrajudicial recovery in August, says agency

Petrochemical company Braskem is in advanced discussions for a potential request for extrajudicial recovery, which could be filed as early as this month, aiming to resolve more than US$10 billion in debt in its operations in Brazil, the United States and Europe, two people familiar with the negotiations told Reuters on Wednesday. The company, controlled by private equity manager IG4 Capital and Petrobras, is racing against time until August 24, as on that date protection obtained through a precautionary measure in June expires, according to the sources, who requested anonymity due to the confidentiality of the negotiations. The petrochemical company declined to comment. Braskem, whose control was recently acquired by IG4 from the engineering group Novonor (formerly Odebrecht), has been dealing with a prolonged down cycle in the petrochemical sector and should need three to five years to resolve all its inherited challenges, according to the same sources. In addition to depressed prices in the petrochemical sector, Braskem's cash position has been weakened by an environmental disaster linked to its salt mines in Alagoas. Although Braskem has been discussing alternatives with creditors, including bondholders and banks, to avoid a lengthy restructuring process, no agreement has been reached so far, the sources said. Creditors rejected an offer from Braskem to pay the principal with a grace period of five years, in addition to a grace period of two and a half years for interest payments, according to the sources. If current restructuring discussions move forward, the sources added, the structure of Braskem's extrajudicial request will include a 90-day stay period to negotiate a comprehensive plan. The window would give the company and its creditors time to reach a mutual agreement, while also protecting it from possible creditor actions. At the same time, Braskem is exploring restructuring options for the approximately US$2 billion debt of its Mexican subsidiary. This could also include a potential Chapter 11 filing (judicial reorganization in the US) with a timeline more or less in line with the Brazilian process, one of the sources said.