Braskem Creditors Balk at Restructuring Plan as Deadline Looms

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Braskem’s creditors shunned another restructuring proposal made by the company and its shareholders ahead of a key Oct. 9 deadline for a deal to rework some $11 billion of debt, people familiar with the matter said.

After a failed round of talks last month, shareholders pledged about $1 billion in fresh capital to backstop a follow-on offering, but only if the company is able to slash its debt significantly through the restructuring process, three people said, asking not to be named because discussions are private. The terms were seen by creditors as insufficient for an agreement, some of the people said.

Parties have until Oct. 9 to agree on the terms of plan — if they fail to do so, a majority of creditors could ask for a dissolution of the out-of-court process, which could lead to a bankruptcy filing, the people said. An agreement by that deadline is seen as as unlikely by creditors, according to the people, who added that conversations are ongoing and no final decision has been made.

Braskem and IG4 declined to comment. Petrobras didn’t immediately reply to a request for comment.

Braskem filed for an out-of-court restructuring in August , and a framework laid out in court documents at that 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 for that 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. Last month, bondholders asked controllers Petrobras and IG4 Capital Group for $3 billion in fresh capital, which has been rejected by shareholders.

Much of the pressure is falling on Petrobras because of its greater financial capacity, and while the oil company has become increasingly involved in the negotiations, it has so far been unwilling to provide the type of enforceable capital commitment sought by creditors, people familiar have said.

Read more: Petrobras CEO Rules Out Larger Braskem Stake Amid Debt Talks

While missing it won’t trigger an automatic change in the process, the Oct. 9 deadline could determine whether negotiations in fact continue or the company moves to a bankruptcy process. The matter becomes particularly delicate given state-owned Petrobras is a shareholder, with the deadline falling in the middle of Brazil’s tightly-disputed presidential election period.