Rounds 2-3 and neutral mediation - 17 August 2026 rerun
Archive note: this is the unmodified mediator output. The published website applies a documented review adjustment to Petrobras capacity, warrants and RJ probability. See the publication review note.
Information cutoff: 17 August 2026. This mediation uses the common brief and the four independently formed round-one positions. Public-record items remain facts; transaction terms, cash ranges outside the disclosed June plan and probabilities are mediator judgments. The package below was derived before comparison with the existing website terms.
Mediation objective and failure alternative
The common objective is to preserve Braskem's going-concern and operating-finance value while allocating the liquidity risk among Petrobras, IG4 and financial creditors. The agreement must not use short-dated supplier credit to cash out legacy financial debt, and it must compensate creditors for extension and PIK without transferring control gratuitously.
The realistic failure alternative is an RJ, possibly preceded by a short cure or creditor-favorable recapitalization. Cure-and-continue is not a durable alternative because a cure of disclosed arrears does not solve LC runoff, the US$1.0B standby due 31 December or the balance of the US$2.349B H2 contractual requirement. In RJ, creditors can seek priority new money and equitization, but all parties risk damage to feedstock, LC and customer relationships. That shared destruction creates a bargaining zone; it does not make every consensual extension financeable.
Round 2 - expose the gaps and trade across them
Areas of real agreement
All four parties agree that:
- the December standby must be extended, refinanced with permanent capital or included in a restructuring; Petrobras trade receivables are not an acceptable takeout;
- US$250M of Petrobras terms is only a short bridge, while US$950M is a mathematical ceiling rather than a prudent base commitment;
- a US$500M committed Petrobras cap is the executable center of the range;
- supplier credit is liquidity, not loss-absorbing shareholder capital;
- a cure is sensible only together with forbearance, maturity relief, LC continuity and minimum liquidity;
- Mexico remains ring-fenced and Alagoas safety, compensation and remediation cash is protected; and
- a 90-day plan-to-a-plan EJ needs milestones, cash controls and termination rights, rather than simply buying time.
Gaps at the start of bargaining
| Issue | Gap after round one | Mediator diagnosis |
|---|---|---|
| Petrobras duration and price | 12 months at SOFR +450bp versus 24-36 months and roughly +200bp to +400bp | Duration matters more than a 50-150bp spread difference; an orderly runoff prevents a new cliff. |
| Sponsor risk capital | Petrobras required only US$150M from IG4; creditors wanted materially more permanent sponsor capital | IG4's US$300M authority limit is the available loss-absorbing anchor. Trade credit cannot fill this gap. |
| LC versus supplier capacity | Some positions described a combined capacity target; others required separate LC support | The products cover different failure modes. Treating them as fungible would double-count resilience. |
| Interest relief | IG4 sought initial full PIK; creditors required a 4% cash floor | A cash floor clears only with protected liquidity and a short, fixed PIK window. |
| Equity upside | Petrobras ended at 15%/22.5%; creditors required 17.5%/25% absent much larger permanent equity | The missing value must come from a small additional warrant grant plus a downside deleveraging mechanism. |
| Collateral | Creditors sought a legacy second lien; Petrobras rejected blanket liens and Braskem protected core plants | New money may prime only what it finances; legacy creditors receive limited residual collateral and downside remedies, not a blanket plant lien at closing. |
Round-2 concessions
- Petrobras moves from 12 to 18 months of committed availability plus a 12-month runoff, keeps the exposure cap at US$500M, and accepts non-voting creditor dilution above its stated 15% endpoint because voting control is not transferred and downside equitization reduces debt rather than requiring Petrobras to overfund. It retains market pricing, independent approval, borrowing-base collateral and a prohibition on legacy-principal use.
- IG4/Shine funds US$300M at closing as deeply subordinated, PIK-only capital and backstops a further US$50M rights amount. It accepts 17.5% initial creditor warrants and objective dilution on failure. Its consideration is four-to-five-year maturity relief, no near-term amortization and no blanket lien on the core crackers.
- Creditors drop immediate US$3.0B equitization and US$750M of new money as live demands. They commit US$300M of incremental LC/RCF support, agree to roll or refinance the US$572M Q3 LC runoff, accept limited collateral, and permit residual coupon PIK for 24 months. They retain a 4% cash floor and enhanced downside equity.
- Braskem accepts the creditor cash floor, 17.5% initial warrants, restricted payments, a CRO/restructuring director, detailed cash-conversion reporting, limited second liens and a contingent 2028 deleveraging test. It receives no principal haircut at closing and preserves operational control absent a real performance failure.
Round 2 produces an economic zone, but it is not yet stable: the cure could still leak cash, supplier and LC capacity could be double-counted, and the downside triggers are not sufficiently mechanical.
Round 3 - make the bridge enforceable
The final round makes three linked trades.
First, the Petrobras facility is expressly additive to LC capacity at closing. Petrobras terms substitute only for the portion of cash-in-advance naphtha purchases they actually finance. They do not replace performance/import LCs, bank reimbursement obligations or the US$572M scheduled LC runoff. After two quarters of at least 70% EBITDA-to-operating-cash conversion and unrestricted liquidity above US$1.0B, up to US$100M of undrawn incremental LC capacity may be reduced dollar-for-dollar against an equal, then-available increase in committed Petrobras exposure. There is no substitution before those tests.
Second, cure is made simultaneous rather than aspirational. Braskem may pay verified overdue interest, stated as US$98M publicly disclosed defaults plus any subsequently verified accrued amount, only on the effective date of: (i) an adhering-creditor standstill and waiver/rescission of acceleration; (ii) extension or EJ treatment of the standby; (iii) first availability under the Petrobras line; (iv) LC rollover; and (v) IG4 funding. Paying arrears alone is prohibited. Counsel must map each instrument's cure, 25% acceleration, majority rescission and cross-default mechanics; the cure is not complete until expenses and other conditions required for rescission are satisfied. Pro forma unrestricted liquidity must be at least US$750M at the interim closing and reach US$1.0B at definitive closing.
Third, creditors accept no immediate debt conversion in exchange for a precise warrant and deleveraging ladder. Initial non-voting warrants equal 17.5% of fully diluted equity. They step to 25% if any two-quarter cash-conversion test is missed, unrestricted liquidity is below US$750M, PIK does not end after 24 months, or the agreed leverage milestone is missed. At year-end 2028, debt sufficient to reduce net leverage to 5.0x, capped at US$1.0B, converts at an independently determined reorganized equity value if net leverage remains above 5.0x. Existing warrant value is credited in setting conversion economics to avoid double recovery. Loss of controller voting control can occur only against actual debt cancellation, not a technical covenant breach.
Stress test: EBITDA is not cash
The Q2 US$547M working-capital use should not be annualized mechanically, because price and inventory balances can stabilize or reverse. The loss of payment arrangements and LC capacity is persistent, however. The relevant underwriting fact is unrestricted parent cash after working capital, taxes, maintenance capex, cash interest, LC movements and protected Alagoas spending.
| Q3 EBITDA case | September unrestricted cash before new support | US$250M trade cap | US$500M trade cap | US$950M trade cap | December standby conclusion |
|---|---|---|---|---|---|
| US$586M June plan | ~US$337M | ~US$587M | ~US$837M | ~US$1.287B | Cannot prudently pay. Even the ceiling leaves ~US$287M after the standby before other Q4 and operating needs. Extend/include. |
| US$750M sensitivity | US$250M-US$500M | US$500M-US$750M | US$750M-US$1.0B | US$1.20B-US$1.45B | Cannot prudently pay. The ceiling leaves only US$200M-US$450M after the standby before other Q4 uses. Extend/include. |
| US$1.0B upside | ~US$500M-US$750M | US$750M-US$1.0B | US$1.0B-US$1.25B | US$1.45B-US$1.70B | Payment is arithmetically possible only in favorable cap/conversion cases, but unsafe after roughly US$471M of other Q4 contractual requirements and an operating reserve. Extend, with optional later prepayment from durable free cash flow. |
These figures show gross liquidity timing, not free cash. A drawn supplier payable is a future claim and must revolve or run off. Accordingly, US$500M is the minimum stable Petrobras commitment, US$250M causes the interim package to fail unless replaced by equal permanent/LC liquidity, and US$950M permits lower incremental creditor working-capital funding only after performance tests; it never reduces sponsor dilution or pays the standby.
Narrowest stable clearing package
| Term | Final mediated term |
|---|---|
| Process | File a protected 90-day plan-to-a-plan EJ with at least one-third support, weekly liquidity reporting and hard milestones for the RSA, Petrobras approvals, LC rollover, IG4 funding and definitive plan. Missed milestones terminate forbearance after a short remedy period. |
| Maturities | Extend the standby and near/intermediate funded debt five years; no mandatory principal amortization for 24 months. Preserve 2041/2050 maturities. Voluntary prepayment and sweeps are allowed. |
| Interest | 4% cash plus residual contractual coupon PIK for 24 months; existing weighted coupon plus 150bp in cash afterward. A 1.5% PIK consent fee and documented committee expenses are capitalized; no retroactive default-rate interest at closing. |
| Petrobras | US$500M committed revolving naphtha trade facility, invoices up to 180 days, 18-month availability plus 12-month runoff, SOFR-equivalent +400bp and up to 1% undrawn fee (or independently benchmarked BRL/CDI equivalent). First lien only on financed inventory, eligible receivables and proceeds; independent related-party approval; no legacy-principal use, Mexico guarantee or Alagoas claim. An independently approved US$100M accordion is available only after the 70% conversion test. |
| LC / creditor liquidity | Roll/refinance the US$572M Q3 LC runoff and provide US$300M incremental LC/RCF capacity for at least 24 months, extendible with the plan. This is additive to Petrobras support at closing. Genuine new money has first lien only over its financed pool and separately identified unencumbered collateral. |
| IG4/Shine | US$300M funded at interim/definitive closing as deeply subordinated, unsecured, PIK-only capital, plus a US$50M rights backstop. No cash service, fees, security or repayment while affected debt is impaired. |
| Cure | Simultaneous cure/standstill mechanics described above; no isolated payment. US$750M interim and US$1.0B definitive minimum unrestricted liquidity. |
| Warrants/equity | 17.5% fully diluted non-voting warrants at closing, stepping to 25% on objective misses. No principal haircut at closing. Year-end 2028 contingent conversion sized to reach 5.0x net leverage, capped at US$1.0B, with fair valuation and credit for warrant value. |
| Collateral | Separate first liens for Petrobras and genuine creditor new money over assets each finances. Legacy debt gets a limited second lien over residual eligible working capital, selected non-core assets and legally available foreign-subsidiary shares. No blanket lien on Brazilian crackers and no Alagoas collateral. |
| Cash controls | No dividends/buybacks while PIK remains or until net leverage is below 3.5x for two quarters; no material M&A, new liens or leakage; 50% excess-cash sweep above US$1.0B; 75% qualifying net asset-sale sweep; independent restructuring director/CRO, board observer and consent rights for extraordinary transactions. |
| Reporting/triggers | Weekly 13-week cash flow during the bridge; monthly EBITDA-to-cash bridge separating inventory/price working capital, supplier-finance changes, LC runoff, capex, interest and Alagoas; quarterly leverage and conversion tests. |
| Mexico | Braskem Idesa remains ring-fenced; its cash is not parent liquidity. No new parent guarantee or cross-collateralization. Standalone financing plan within 120 days; sale/JV only after independent valuation and local obligations. |
| Alagoas | Safety, relocation, compensation, monitoring and remediation are unimpaired, separately budgeted and reported. Restricted resources are excluded from collateral, liquidity tests and sweeps. |
Dilution
At closing, legacy holders collectively retain 82.5% of fully diluted equity and creditors hold 17.5% through non-voting warrants. On a trigger step-up, legacy holders retain 75.0% and creditors hold 25.0%, before any 2028 conversion. The exact additional dilution from the capped US$1.0B conversion cannot be stated without the independently determined equity value; reporting it as a fixed percentage now would be false precision. Controller voting rights are preserved at closing because the warrants are non-voting, but can be diluted in a genuine debt-cancellation event.
Key triggers and decision rule
- Immediate failure / RJ preparation: Petrobras commitment below US$500M without dollar-for-dollar replacement; failure to roll the US$572M LC runoff; failure of IG4 to fund US$300M; acceleration that cannot be rescinded; interim liquidity below US$750M; or loss of the court/creditor standstill.
- Warrant step to 25%: two consecutive quarters below 70% EBITDA-to-operating-cash conversion, liquidity below US$750M, failure to exit PIK after 24 months, or a missed agreed leverage test.
- 2028 conversion: net leverage above 5.0x at 31 December 2028 after an agreed cure/review process.
- Upside release: two quarters at or above 70% conversion and US$1.0B liquidity permit the limited trade/LC substitution and voluntary prepayment; distributions remain blocked until leverage is below 3.5x for two quarters.
The single fact most likely to change the package is a bank-verified rolling 13-week cash-flow and borrowing-base report proving the conversion of Q3 EBITDA into unrestricted parent cash after all operating, financing and protected obligations. Cash conversion of at least 70% and September cash above US$500M supports the package; conversion below 40% or cash below US$250M makes immediate equitization or RJ more likely.
Outcome probabilities
| Mutually exclusive outcome | Probability |
|---|---|
| Plan-to-a-plan EJ followed by the debt-plus-warrants package above | 50% |
| Standalone cure-and-continue with an external standby refinancing | 5% |
| Creditor-favorable consensual recapitalization with greater collateral or equitization | 23% |
| RJ after failed commitment, adhesion, cure or acceleration | 22% |
| Total | 100% |
The base outcome is only marginally more likely than all alternatives combined. The reported Petrobras concept improves the path to an interim filing, but no cap, approvals, final creditor adhesion or funding was publicly committed at the cutoff.
Conditional probability sensitivities
Each row sums to 100%. These are scenario judgments, not independent forecasts and not inputs to the unconditional probabilities above.
| Condition | Base EJ | Standalone cure | Creditor-favorable deal | RJ |
|---|---|---|---|---|
| Q3 EBITDA US$586M, Petrobras cap US$500M, weak/uncertain conversion | 42% | 3% | 25% | 30% |
| Q3 EBITDA US$750M, Petrobras cap US$500M, September cash near range midpoint | 52% | 5% | 23% | 20% |
| Q3 EBITDA US$1.0B, Petrobras cap US$500M, conversion at least 70% | 62% | 9% | 19% | 10% |
| Petrobras cap only US$250M, Q3 US$750M case | 32% | 3% | 27% | 38% |
| Petrobras cap US$950M and durably committed, Q3 US$750M case | 60% | 7% | 22% | 11% |
The US$950M row does not imply that the ceiling is likely or that it is permanent capital. Its benefit is liquidity runway; its cost is concentrated supplier exposure. The US$1.0B EBITDA row improves cure odds only modestly because December still needs an external extension or refinancing.
Comparison with the prior website base terms
Only after deriving the package above was it compared with the existing website base. The broad economics remain close, but the new information changes the architecture.
| Term | Prior website base | Rerun mediation | Change |
|---|---|---|---|
| Extension | 5 years | 5 years | Unchanged. |
| Relief interest | 4% cash + ~4% PIK for 2 years | 4% cash + residual contractual PIK for 24 months | Similar, now instrument-specific rather than assuming a uniform 4% PIK. |
| Post-relief coupon | Existing +200bp | Existing +150bp | 50bp lower, exchanged for higher initial creditor upside and hard conversion remedies. |
| Petrobras | US$550M, described as capped support | US$500M committed trade credit; conditional US$100M accordion | Lower firm cap and explicit supplier-credit legal/economic character, tenor, price, collateral and use restrictions. |
| IG4 | US$275M contribution/backstop | US$300M funded + US$50M rights backstop | More clearly loss-absorbing and larger. |
| Creditors | US$275M new money/LC | US$300M incremental LC/RCF plus explicit US$572M LC rollover | Slightly larger and no longer ambiguous about LC runoff. |
| Working capital / LC | US$1.1B aggregate | US$500M trade + US$300M incremental LC/RCF, with US$572M runoff rolled | Not directly comparable: the rerun separates new liquidity from avoided runoff and prevents double counting. |
| Warrants | 15%, stepping to 22.5% | 17.5%, stepping to 25%, plus capped 2028 conversion | More creditor-favorable because commercially priced supplier credit is not counted as permanent sponsor capital. |
| Minimum liquidity | US$1.0B | US$750M interim; US$1.0B definitive/sweep threshold | Same final floor, with an executable bridge threshold. |
| Probabilities | 50% base EJ; 15% equity-friendlier; 20% creditor-favorable; 15% RJ | 50% base EJ; 5% standalone cure; 23% creditor-favorable; 22% RJ | The rerun explicitly prices cure and raises downside risk because the reported facility remains nonbinding and positions remain far apart. |
The decisive rerun conclusion is therefore not simply a different midpoint. It is that Petrobras trade credit and LC capacity must be documented as separate, additive protections at closing, while the absence of large permanent sponsor equity is paid for through 2.5 percentage points more initial and contingent creditor dilution and a mechanical 2028 deleveraging backstop.