Creditors Seek Chapter 11 for Braskem's U.S. Finance Unit as Restructuring Stalls
Key Facts
Creditors filed an involuntary Chapter 11 bankruptcy petition against Braskem America Finance in the Bankruptcy Court for the Southern District of New York, according to Bloomberg, in a legal move that comes amid stalled negotiations to restructure the group's debt. The petition rests on creditors' assertion that the company is "generally not paying its debts as they become due," the agency reported, citing the filing. The petitioners are FFI, FYI and Olifant funds, which are seeking to place the U.S. unit into the court process. Chapter 11 typically allows for reorganization, according to the U.S. courts, with the debtor proposing a plan to continue operating and repay creditors over time. The move leaves Braskem's finance unit facing a creditor request to initiate U.S. proceedings alongside the group's efforts to address its liabilities in Brazil.
The unit targeted by the petition is incorporated under Delaware law and was established primarily for financing purposes, according to Braskem documents concerning the company. It is wholly owned by Braskem America, which in turn is wholly owned by Braskem, making it an indirect subsidiary of the group. Braskem and the entities participating in the Brazilian mediation had previously also turned to the U.S. courts, according to a company disclosure filed with the U.S. Securities and Exchange Commission. Those entities filed a Chapter 15 petition seeking recognition of the judicial protection granted to them in Brazil. The earlier application sought recognition of the Brazilian proceedings, while the current action is an involuntary petition by creditors against the U.S. finance company.
In Brazil, the out-of-court reorganization petition filed in August covered about $10.9 billion in unsecured financial liabilities, according to a separate Braskem disclosure. That amount represents the liabilities covered by the Brazilian petition through which the group is seeking to reorganize its debt. The company said when it filed the petition that creditors joining the plan represented 39.6% of the claims covered. Braskem described that share as sufficient to file the petition, according to the disclosure lodged with the U.S. regulator. The Brazilian proceedings thus began with enough support to submit the petition, while securing the minimum support needed to approve the updated plan remained a subsequent step in the process.
But negotiations encountered another setback in early October, when Bloomberg reported, citing people familiar with the matter, that creditors had rejected another restructuring proposal. The offer included a commitment of about $1 billion in fresh capital to backstop a subsequent share offering, according to the agency. The proposed funding was tied to a shareholder contribution under the restructuring arrangements being negotiated with creditors. Shareholders made their funding commitment conditional on Braskem being able to substantially reduce its debt through the restructuring, according to the same report. That condition linked the provision of fresh capital to a reduction in the debt burden, both elements of the proposal rejected by creditors.
Braskem's earnings results illustrate the scale of the debt accompanying the restructuring negotiations, with total corporate debt standing at $10.3 billion on June 30, 2026. That balance appeared in the earnings disclosure filed with the U.S. Securities and Exchange Commission for the quarter ended on that date. The group ended the same quarter with adjusted net debt of $9.5 billion, up 3% from the previous quarter. Braskem's management attributed the pressure on liquidity partly to the continuing downturn in the petrochemical industry and structurally compressed margins. Management described industry conditions in its disclosure as an "extended downturn in the petrochemical industry, with structurally compressed margins."
The next steps include a deadline set out in the Brazilian disclosure for securing the support required to approve the updated plan. The deadline is 90 days from the filing date of the reorganization petition, under the terms Braskem announced when it began the proceedings. That timeframe is tied to securing the minimum creditor support needed to approve the plan. On financing, the group's standby credit facility remains an upcoming maturity among its obligations, according to its disclosure to the U.S. regulator. The facility matures in December 2026.