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A week after the surprising Lula victory in Brazil — we’d said the race was too close to call after Lula gained ground, not that he’d win by 4 million votes! — petrochemical Braskem and its creditors were hard at work this week to agree commercial terms on its extrajudicial restructuring (EJ) by the extended 30 October deadline. The parties had agreed to wait until a week after the runoff results, as Braskem shareholder Petrobras would be more willing or able to commit capital under a Lula presidency than under a Flávio Bolsonaro administration.
On Saturday, the company disclosed cleansing materials that illustrated the gap between its proposal and investors’ demands. Braskem wants to convert $2.8bn of the nearly $11bn debt into equity. Both creditors and shareholders IG4 Capital and Petrobras would commit to inject $1.2bn in a $2.25bn follow-on offering. And while creditors agree on the follow-on, they want $1.85bn to come from either the shareholder or creditor-approved third parties. The creditor ad-hoc group also wants a smaller debt-to-equity conversion, of $1.85bn.
Other differences include the terms and amounts for secured takeback debt. Braskem favors up to $6.8bn, with amortizations beginning in 2033; a coupon that’s 125bps...
