Petrobras independent negotiation position - 17 August 2026

Status of information and mandate

Verified facts. Petrobras owns 47.03% of Braskem's voting capital and 36.15% of total capital, shares control with Shine I, and accounts for Braskem as a joint venture. Braskem bought R$5.098B of raw materials, products, services and utilities from Petrobras and subsidiaries in H1 2026. Braskem had US$10.3B of gross debt, US$9.5B of adjusted net debt, 6.74x adjusted corporate net leverage and approximately US$795M of unrestricted cash in the June plan. That plan projected only about US$337M of unrestricted cash at 30 September after Q3 contractual requirements. The US$1.0B standby facility matures on 31 December 2026.

Reported, not verified. Valor reported on 17 August that Petrobras had discussed moving naphtha purchases now paid in cash to terms of as long as six months, with cap, price, format and duration unresolved. It also reported that the parties were still far apart and were considering a generic plan-to-a-plan EJ before 24 August.

Inference. A capped extension of naphtha terms is commercially and politically defensible only as a working-capital product with repayment tied to Braskem's sale of financed resin. It cannot be presented as loss-absorbing shareholder capital and should not fund a December repayment to the standby lenders.

1. Objective and alternative

Petrobras's objective is to preserve a viable Brazilian petrochemical customer, feedstock demand, domestic operations and Brazilian strategic influence while earning a market return and avoiding consolidation, uncapped Alagoas/Mexico exposure, or a Petrobras-only rescue. The preferred outcome is a consensual or plan-to-a-plan EJ that binds a durable creditor maturity extension before the first material draw and preserves Petrobras near its current voting percentage.

If that package cannot be documented, the realistic alternative is a creditor-favorable restructuring-potentially an RJ-with meaningful debt equitization. Petrobras would continue supplying on cash in advance or tightly protected ordinary-course terms and would negotiate to preserve economically important supply contracts and governance rights, but would not defend legacy equity with additional unsecured capital. An orderly RJ is economically and politically preferable to advancing Petrobras money that merely repays legacy creditors.

2. Six-month naphtha terms and shareholder burden-sharing

Proposed commercial instrument

My opening instrument is a US$400M maximum receivables/trade-credit facility:

• eligible naphtha invoices can mature up to 180 days from delivery, versus current cash terms;
• nine-month availability, with no invoice maturity beyond 30 June 2027 unless renewed after a new credit review;
• interest at SOFR + 450bp, with a 0.75% undrawn fee and ordinary default margin of an additional 200bp;
• a first-priority lien limited to the financed naphtha, identifiable inventory made from it, eligible domestic/export receivables and their proceeds; advance rate capped at 80% of eligible receivables and 65% of eligible inventory, with weekly borrowing-base reporting;
• collections swept through controlled accounts; excess availability cannot fund dividends, shareholder payments, acquisitions, asset leakage, legacy principal or unbudgeted related-party transfers;
• no Petrobras guarantee of Braskem debt and no Braskem parent guarantee or cross-collateralization for Mexico.

The six-month invoice tenor is not the same as a six-month rescue. The commitment must remain available long enough for a restructuring to become effective, while each advance self-liquidates within 180 days. At the approximately US$2.0B annualized H1 Petrobras purchase flow, the theoretical move from roughly nine days to 180 days creates about US$950M of liquidity, but a US$400M cap would be reached in roughly 2.4 months of gross purchases. The cap, not the quoted 180-day term, controls Petrobras's exposure.

Cap sensitivity

Trade credit satisfies only the liquidity component of shareholder burden-sharing. Because Petrobras is senior and collateralized by the assets it finances, its expected-loss contribution is modest. It qualifies as an adequate Petrobras contribution at US$500M only if: (i) affected creditors extend near/intermediate maturities for five years; (ii) IG4 contributes at least US$150M of cash as subordinated capital before or pari passu with Petrobras availability; (iii) creditors fund or backstop at least US$250M of LC/RCF capacity; and (iv) creditors take PIK and warrants rather than cashing out. A package with no IG4 cash is not shared burden even at a US$950M Petrobras cap.

Petrobras could stretch to US$600M of trade exposure, or US$500M of trade exposure plus US$100M of deeply subordinated non-voting hybrid, after independent valuation and approvals. The absolute modeled exposure ceiling is US$750M, but only if IG4 contributes at least US$200M, creditors provide at least US$300M of new LC/RCF capacity, and downside milestones automatically suspend further draws. The US$750M figure is a ceiling, not an offer.

3. Operating cases and cure-and-continue

EBITDA is not cash. Q2 working capital consumed US$547M; the price and inventory portions need not recur if markets stabilize, but reduced payment arrangements are persistent. Supplier terms primarily change the timing of cash, while interest, capex, taxes, Alagoas payments and maturing debt still consume it.

The upper-case September cash arithmetic is deliberately transparent: US$337M plus US$414M equals US$751M. It is not a claimed result. The lower US$501M endpoint allows US$250M of slippage/non-conversion. There is no disclosed Q4 EBITDA or full cash-flow forecast in the provided record, so none of the three cases alone proves that Braskem can pay US$1.0B on 31 December.

Cure-and-continue has only an 8% standalone probability and is not a credible complete solution. Paying the disclosed US$98M defaults plus any other overdue interest before acceleration may avoid or reverse acceleration where instrument terms permit. It does not fund US$572M of Q3 LC runoff, the residual H2 obligations or the US$1.0B standby maturity. Petrobras will permit at most US$100M of incremental trade availability to support operations during a short cure window, and only with a signed creditor standstill; it will not finance the cure itself. Cure-and-continue becomes credible only if standby lenders commit a 24-month takeout/extension and LC banks maintain capacity. At that point it is economically a restructuring, even if documented outside an EJ.

4. Negotiating packages

Opening package

• Five-year extension of all near/intermediate corporate maturities, including the December standby; no amortization for 24 months.
• Existing cash coupon paid 50% in cash/50% PIK for 12 months, then 100% PIK for a second year at Braskem's option if minimum liquidity would otherwise fall below US$500M; cash coupon thereafter at existing rate plus 150bp.
• US$400M Petrobras six-month-invoice trade facility on the terms above; US$150M IG4 subordinated cash; US$250M creditor LC/RCF backstop.
• Creditors receive 7.5% warrants on a fully diluted basis, with no initial debt conversion.

First concession

• Raise Petrobras trade cap to US$500M and availability to 12 months, while retaining a 180-day maximum invoice maturity and SOFR + 450bp pricing.
• Raise post-PIK coupon step-up to +200bp and creditor warrants to 10%.
• Accept limited second-priority collateral for creditor new money over assets not in the Petrobras borrowing base; no lien for legacy unsecured debt.
• Allow a US$100M cash cure from Braskem's own unrestricted cash, subject to a US$500M pro forma minimum-liquidity test and simultaneous binding maturity extension.

Narrowest acceptable package

• At least four years of maturity extension (the standby included), 18 months with no principal amortization, and 12 months of at least 50% PIK.
• Petrobras maximum US$600M trade exposure, or US$500M trade plus a US$100M deeply subordinated, non-voting hybrid; market pricing, borrowing-base collateral and independent related-party approval remain non-negotiable.
• IG4 contributes at least US$150M cash junior to Petrobras; creditors provide at least US$250M in new LC/RCF support.
• Creditor warrants of 15%, stepping to 22.5% if rolling operating cash conversion is below 70% of EBITDA for two quarters, minimum unrestricted cash is breached, or PIK exit tests are missed. No automatic control transfer after a technical default.
• No dividend, buyback, material acquisition or non-ordinary-course asset sale until net leverage is below 4.0x and all PIK is current; a US$500M minimum unrestricted-liquidity covenant and monthly reporting.

If creditors insist on blanket liens for legacy debt, immediate creditor control, or use of Petrobras advances for legacy principal, Petrobras walks to the creditor-favorable/RJ alternative.

5. Instrument and issue treatment

• Maturities: five-year extension sought; four years is the floor. The December standby is extended or included in the EJ. No Petrobras-funded payoff.
• Interest: 50% cash/50% PIK for year one; conditional full PIK in year two. Afterward, cash coupon at existing rate plus 150-200bp. PIK accrues at the same stepped rate and cannot be paid while minimum liquidity is breached.
• LC and trade facilities: ordinary-course LCs and bilateral trade lines remain money-good and senior in their own collateral. Creditors/backstop banks provide at least US$250M of renewed LC/RCF capacity. Petrobras receives only financed-asset collateral, not core-plant liens.
• Petrobras: capped six-month invoice terms at market price, borrowing-base controls, no debt guarantee, no use for legacy principal, draw only after a binding extension/standstill and IG4 funding. Exposure does not exceed 50% of total committed new-money/trade liquidity at closing unless independently approved.
• IG4/Shine: at least US$150M junior cash; no management, monitoring or dividend payments while PIK or covenant defaults remain. Its dilution is at least pro rata with Petrobras and greater if it fails to fund.
• Creditor new money: US$250M minimum LC/RCF backstop, super-senior only in unencumbered collateral and proceeds it finances; no priming of Petrobras's borrowing base and no convertible control trap.
• Warrants/equity: 7.5% opening, 10% first concession, 15% final with a performance step to 22.5%. Petrobras will not cross 50% voting ownership and prefers non-voting instruments. If normalized EBITDA and cash conversion remain weak, Petrobras accepts substantial creditor equitization rather than overfunding.
• Collateral: financed inventory, eligible receivables and proceeds for Petrobras; limited separate collateral for genuine creditor new money. No blanket lien on Brazilian plants for legacy unsecured claims.
• Covenants/governance: US$500M minimum unrestricted liquidity; 13-week cash forecast updated weekly; monthly borrowing-base certificate; capex, asset-sale and related-party budgets; no distributions; independent audit/valuation and related-party committee approval; creditor observer/information rights without operational control; draw suspension upon borrowing-base deficiency, misuse, acceleration or missed Alagoas funding.
• Mexico/Braskem Idesa: ring-fenced. No new Petrobras parent guarantee, cross-default expansion or cross-collateralization. Mexico funds itself from local cash, partners and assets; only properly priced ordinary-course supply exposure is permitted.
• Alagoas: budgeted safety, relocation, compensation and remediation payments are protected and reported separately. They rank ahead of dividends, sponsor payments and warrant distributions. The plan may not divert restricted victim/remediation funds or make Petrobras an Alagoas guarantor.

6. Political and governance constraints

Verified facts. The negotiation falls during the campaign for Brazil's 4 October election. Petrobras is state-controlled, but Law 13,303 imposes governance, transparency, risk-control and related-party standards. President Lula has said Petrobras should consider Brazil's priorities while also saying the government does not command the company. Federal policy supports the chemical chain, and Alagoas proceedings and obligations remain live.

Inference. A market-priced borrowing-base facility plus visible IG4 and creditor burden-sharing has the best political optics: it protects operations and jobs without transferring public-company value to existing sponsors or foreign legacy creditors. An uncapped Petrobras rescue is exposed to a bailout criticism; a disorderly RJ or abrupt creditor takeover is exposed to jobs, supply-chain and national-influence criticism. These political costs improve the relative value of a shared consensual solution, but they do not guarantee one.

Scenario assumption. REIQ/PRESIQ benefits and trade-defense measures may support margins, but the credit case assigns no permanent value to them beyond enacted duration. No government guarantee, direction to rescue Braskem, or permanent spread protection is assumed.

7. Outcomes as of 17 August 2026

The 52% base case includes a generic filing/standstill followed by later definitive documentation; it does not imply a final deal by 24 August. The 8% cure case is low because curing overdue interest does not address the December wall. Strong conversion moves probability from the creditor/RJ cases toward the consensual case; weak conversion does the reverse.

8. Single fact that would most change Petrobras's position

The most consequential fact would be a bank-verified 13-week cash-flow and borrowing-base report showing how much of Q3 EBITDA actually converted to unrestricted parent cash after feedstock, inventory, capex, interest and Alagoas payments. If rolling conversion were at least 70% and September unrestricted cash were at least US$500M, Petrobras could justify the US$500M cap and consider the conditional stretch. If conversion were below 40% or cash below US$250M, Petrobras would cap support at US$250M, require immediate debt equitization and materially increase the RJ probability.