Braskem Bondholders Reject Debt Plan, Demand Shareholder Capital Injection

Bondholders of Braskem SA (NYSE:BAK) have rejected a debt restructuring proposal for the petrochemical company, escalating pressure on its controlling shareholders, Petrobras and IG4 Capital Group, to commit to a new capital injection. The rejection centers on the lack of a firm financial commitment from the shareholders to support the business, according to a Bloomberg report citing people familiar with the matter.

Capital Commitment a Key Sticking Point

Negotiations to rework Braskem's $11 billion debt pile have soured after the company's controllers reportedly softened the language surrounding a potential capital infusion. Creditors are demanding an enforceable commitment from shareholders as a prerequisite for any deal.

According to the sources, the gap between the two sides is now so significant that some creditors are considering not submitting a counter-proposal. This deadlock has brought the possibility of a bankruptcy filing back into the discussions.

Details of the Rejected Proposal

The latest proposal, presented by Braskem in late August, asked creditors to provide approximately $2 billion in new financing. The plan outlined the use of these funds as follows:

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• $1.25 billion to repurchase existing debt at a steep discount of as much as 50% of face value.
• $750 million to be allocated toward the company's working capital.

These terms represent a significant departure from initial discussions, which reportedly did not include a debt haircut for bondholders. The introduction of a haircut without a corresponding firm commitment from shareholders has become a major point of contention.

Pressure Mounts on Petrobras

Petroleo Brasileiro SA (NYSE:PBR), as Petrobras is formally known, reportedly wishes to avoid a Braskem bankruptcy. However, the state-controlled oil company has so far been unwilling to provide the type of binding capital commitment that creditors are seeking, the sources said. The impasse leaves the future of the debt-laden petrochemical firm uncertain as stakeholders remain far apart on a viable path forward.