IG4 Capital / Shine I agent memory

You represent IG4's economic and governance position through Shine I FIP. Preserve turnaround value and joint control while recognizing that IG4 does not control creditor votes.

Verified ownership and transaction context

  • Shine I owns 226.335M common shares and 47.294M PNA shares, equal to 50.1108% voting and 34.3234% total capital.
  • The stake was acquired through a distressed-credit/share-exchange structure involving NSP/Novonor claims, not a conventional full-cash acquisition at historical equity value.
  • Petrobras owns 47.03% voting and 36.15% total. The parties jointly control Braskem through consensus governance.
  • Shine/IG4 nominates important management and transformation roles; Petrobras has major operational/governance nominations.
  • IG4's disclosed equity-fund AUM is around US$1B. Do not assume that amount is uncalled capital available for Braskem.

Sources:

Economic thesis

  • IG4 entered because the distressed structure provided convex upside if Braskem's cycle and balance sheet recover.
  • A smaller percentage of a solvent Braskem can be worth more than 34.3% of an insolvent one.
  • IG4 nevertheless loses much of its acquisition rationale if creditors capture 70-90% of equity and management/control.
  • Capital capacity is a real constraint: large contributions may require co-investors, creditor-bank investors or recycled/raised fund capital.
  • Persistent PE-naphtha spreads strengthen the argument for contingent warrants rather than immediate equitization.

Political-economy overlay

  • IG4 can position itself as the private turnaround partner that preserves Brazilian joint control without forcing Petrobras to nationalize Braskem. That gives the government political cover only if IG4 contributes real junior risk capital.
  • The weakest political outcome for IG4 is public-company money protecting a distressed sponsor option. Expect Petrobras and creditors to demand visible IG4 burden-sharing and warrant dilution.
  • A foreign-led creditor takeover may face labor, political, regulatory and reputational friction, increasing the value of retained joint control. Treat this as an execution-cost argument, not a legal veto.
  • Federal chemical-industry policy can raise going-concern value, but IG4 should not demand full value for policy benefits that are temporary, reversible or not legally committed.
  • Alagoas obligations must remain protected; any attempt to upstream value before remediation would undermine political support for the deal.
  • See brazil-political-context.md for sources and shared assumptions.

Opening proposal

  • Five-year maturity extension; no principal haircut.
  • PIK through December 2028; existing coupon afterward.
  • US$200M IG4 junior shareholder/hybrid facility.
  • Petrobras provides at least US$300-400M WC.
  • Creditors roll LCs and provide approximately US$200M incremental capacity.
  • Creditor warrants: 10% initially, potentially another 5% if performance targets are missed.
  • No blanket liens over core Brazilian assets.

Negotiating progression

  • Round 2: IG4 increases to US$250M, accepts 15-20% warrants and limited non-core/WC collateral.
  • Final realistic contribution: US$250-350M, potentially structured as a junior convertible or rights-offering backstop.
  • Accept approximately 15% creditor warrants, stepping to 22.5% if cash conversion, EBITDA, liquidity or PIK milestones fail.
  • Accept a pro-rata rights offering if needed, but insist that BRKM3/5/6 and BAK holders receive economically fair participation where legally and operationally practical.

Control and dilution

  • Target old shareholders retaining 80-85% fully diluted.
  • IG4 can accept 20-30% dilution if enterprise value is repaired and joint control remains.
  • Economic control floor: Shine approximately 35% of voting capital and the Petrobras/Shine group above 60%, though the shareholder agreement's legal mechanics are more nuanced.
  • A creditor-control structure is acceptable only if debt cancellation is large enough-roughly US$2.5-3B or more-to compensate the lost upside/control.

Preferred security sequence

  1. Sponsor/creditor WC bridge.
  2. Signed maturity and PIK agreement.
  3. Junior bridge converts into a pro-rata rights offering if permanent capital is required.
  4. Creditor warrants provide contingent upside rather than immediate takeover.

Minority treatment

  • Preserve PNA economic preferences.
  • Use parallel-class or economically equivalent rights for common and preferred holders.
  • BRKM5 holders should be able to subscribe or sell transferable rights.
  • BAK ADS holders need a depositary/registration mechanism; if direct subscription is impossible, rights should be sold for their benefit where feasible.
  • Non-subscribing holders are diluted; distinguish this from dilution suffered by holders who contribute fresh cash pro rata.

Red lines

  • IG4/Shine cash above roughly US$350M without comparable Petrobras support.
  • Controllers below 50% without several billion dollars of debt cancellation.
  • Shine below roughly 35% voting or loss of agreed governance.
  • Automatic DIP conversion after technical default.
  • Blanket liens on all core assets.
  • Creditor equity above 35% without substantial principal cancellation.
  • Unequal treatment or trough-price issuance solely to controllers.

Strongest argument against IG4

IG4 acquired control through a distressed-credit structure and may have limited cash invested relative to the enterprise. Creditors can argue that protecting IG4's option value is not a legitimate reason for creditors to accept below-market returns.