Round 1: Braskem management and board

Cutoff: 18 August 2026.

This is the opening position of Braskem S.A. management and the board of directors. The mandate is to preserve the operating company, liquidity and enterprise value. The board will not reject a superior going-concern package solely to protect IG4 or Petrobras control percentages.

Evidence standard

Verified means a company filing, court docket or other primary public document through 18 August 2026. Reported means press accounts that the company has not confirmed. Inference is the board’s judgment and is not a filing fact.

Objective and realistic alternative

Verified. Corporate gross debt was US$10.3 billion and adjusted net debt was US$9.5 billion at 30 June, with adjusted corporate net leverage of 6.74x. Those figures already exclude Braskem Idesa project debt. Q2 recurring EBITDA was US$1.043 billion. The São Paulo stay covering invited mediation creditors was granted on 26 June and is reported to expire on 24 August. No signed parent extrajudicial reorganization plan and no committed Petrobras naphtha cap were public at the cutoff.

The board’s objective is a parent plan-to-a-plan extrajudicial reorganization, or a fully documented consensual plan, that rolls letters of credit, extends 2026–28 maturities including the US$1.0 billion standby due 31 December 2026, funds operations and Alagoas obligations, and keeps Braskem Idesa as a separate estate. If adhesion, committed liquidity or a stay extension cannot be obtained before acceleration, the realistic alternative is a Brazilian judicial reorganization of Braskem S.A. RJ would damage letter-of-credit capacity, feedstock access, customer confidence and working-capital availability, and it is therefore a value-destructive last resort rather than a tactic. It is still preferable to an uncontrolled acceleration, a fire-sale equitization, or a package that liens substantially all core Brazilian assets without cancelling principal.

Sequencing: Mexico first was rational

Verified. On 18 August Braskem S.A. filed a Material Fact confirming that Braskem Idesa reached a comprehensive consensual restructuring and commenced a prepackaged Chapter 11 in the Southern District of Texas. Senior debt at Idesa is to fall from approximately US$2.5 billion to approximately US$1.6 billion. Braskem, as controlling shareholder, will contribute US$476 million, of which approximately US$126 million had already been made available. Majority ownership is retained. Operations continue. Unsecured creditors and trade vendors are to be paid in the ordinary course. Completion is expected in about 60 to 90 days.

Inference. Closing Mexico contagion six days before the reported parent-stay expiry was the rational sequence. Idesa was already a separate default, with Q2 utilization at 43 percent and Q2 Mexico EBITDA of US$57 million that must not be annualized. An interrupted Mexican complex, an uncontained noteholder fight, or a disorderly parent cross-default narrative would have been a worse opening into 24 August than a funded prepack that keeps the plant running. The remaining cheque of approximately US$350 million is the cost of that insurance. The board will not reopen Mexico economics in the parent mediation except to cap leakage.

Mexico treatment in every package

1. Braskem Idesa remains a separate estate. There is no disclosed parent guarantee of the remaining approximately US$1.6 billion of Idesa senior debt, and no Braskem S.A. Chapter 11 or RJ filing.
2. After the disclosed US$476 million, no further parent cash, guarantee, keep-well or cross-collateralization is permitted without the consent of parent financial creditors in the mediation. The remaining approximately US$350 million is the last authorised Mexico cheque, not a programme.
3. The disclosed parent exposures - a term loan of US$180 million committed and US$129 million disbursed, and US$82 million of working-capital loans due December 2026 secured by Idesa assets - are existing claims, not new uses. The term-loan lender is a supporting party to the Idesa deal. Inference: do not assume the US$126 million already funded is that term loan, and do not cash-refinance the US$82 million from parent liquidity; recoveries sit in the Mexico estate.
4. Cutting Idesa senior debt does not delever the US$10.3 billion corporate stack, the 6.74x corporate leverage or the December standby. Any IFRS consolidation effect is optics, not a parent recapitalization.
5. Majority ownership of Idesa is an asset worth preserving at the completed US$476 million price, provided the leak stops. It is a cash leak to be stopped if creditors or the estate demand a further parent cheque.

Q3 cases, with the remaining Idesa contribution as a use

Distinguish EBITDA from cash conversion. The remaining approximately US$350 million is a use of Braskem S.A. and Braskem Netherlands liquidity, not a source. The June plan already showed Q3 contractual debt service of US$878 million, including US$572 million of letter-of-credit runoff. The US$1.0 billion standby still matures on 31 December 2026. H2 contractual debt service in the June plan was US$2.349 billion including that maturity.

June-plan case, Q3 EBITDA US$586 million. Status-quo September unrestricted cash was approximately US$337 million. After the remaining Idesa use, September cash is approximately minus US$13 million to slightly positive only if the remaining contribution slips past 30 September. The December standby cannot be paid. Letter-of-credit runoff cannot be cash-settled. This case requires an extrajudicial reorganization or judicial reorganization, not a quiet cure.

Sensitivity case, Q3 EBITDA US$750 million. Relative to the June plan this adds US$164 million of EBITDA. Depending on operational working capital, September unrestricted cash after scheduled Q3 requirements is approximately US$250 million to US$500 million before any new Petrobras facility and before the remaining Idesa cheque. After US$350 million to Mexico, September cash is approximately minus US$100 million to plus US$150 million. Midpoint conversion still leaves the parent near cash exhaustion. The standby still cannot be paid in cash.

Upside case, Q3 EBITDA US$1.0 billion. Persistent-spread conversion can add roughly US$150 million to US$200 million of cash versus the US$750 million case if naphtha and inventory stabilize, implying September unrestricted cash of about US$400 million to US$700 million before Idesa and about US$50 million to US$350 million after Idesa. That is a going-concern operating print, not a refinancing print. Even this case cannot repay the December standby from cash, and it does not replace a letter-of-credit roll.

Inference. Across all three cases the remaining Idesa use makes Q3 a liquidity event. Q2 working capital consumed US$547 million; verified, the company attributed that to higher feedstock and product prices, higher inventory volumes, and reduced payment arrangements. The price and volume pieces are a level reset, not a run rate, if naphtha and inventories stabilize. The financing piece is persistent. New working capital must rebuild Brazilian operations and letters of credit. It must not be diverted to old principal or to any Mexico amount above the disclosed US$476 million.

On about US$10.3 billion of corporate debt, 4 percent cash interest is about US$412 million a year during relief, before letter-of-credit fees. That burden is serviceable in the persistent-spread case if conversion holds, and tight in a US$1.5 billion normalized year, which is why the board will not add a coupon cut on top of payment-in-kind in the opening and why the standby must be extended rather than repaid.

Petrobras naphtha after the Idesa cheque

Reported, not verified. Valor Economico, citing unnamed sources on 17 August, said Petrobras had discussed commercial support that could extend naphtha currently paid in cash for as long as six months, that the first filing could be a generic plan-to-a-plan extrajudicial reorganization aimed at one-third creditor support before 24 August, and that nothing was final. Format, duration, pricing and the exposure cap remained under discussion. Braskem, Petrobras and IG4 did not comment, and no 18 August filing confirmed a signed, capped facility.

The mathematical ceiling from moving approximately nine-day Petrobras payables to 180 days is roughly US$950 million. Because the report says exposure will be capped, the board tests US$250 million, US$500 million and US$950 million and treats none of them as loss-absorbing capital. If commercially priced, subsidy value is small; liquidity value can be large.

Inference. The remaining US$350 million Mexico cheque makes Petrobras less willing to extend an uncapped or near-ceiling naphtha line, because Law 13,303, election-year bailout optics and minority-shareholder scrutiny all require capped, arm’s-length support tied to Brazilian operations, not a second sponsor cheque after Mexico. The same cheque strengthens the creditor demand for shareholder burden-sharing, because the parent has just demonstrated that it can write a large cheque. Petrobras naphtha therefore does not satisfy burden-sharing by itself at any of the three caps. At US$250 million it does not even replace the Mexico use. At US$500 million it roughly offsets the remaining Idesa drain for Brazilian working capital and is the board’s commercially defensible ask, priced at ordinary naphtha terms, limited to 180 days, and conditioned on an extrajudicial reorganization with IG4 and creditor participation. At US$950 million it is politically and legally the wrong instrument: it looks like a rescue, it is still not equity, and it would be opposed inside Petrobras.

Cure-and-continue is weaker

Verified. After cure periods expired in July, Braskem disclosed R$507 million, or US$98 million, of defaults under certain financial instruments. Public bond terms generally provide a 30-day interest cure. Holders of at least 25 percent of an affected series can generally accelerate after an uncured event of default. The company had not publicly disclosed acceleration as of the cutoff.

Inference. Paying that overdue interest does not pay letter-of-credit runoff, the December standby, or the remaining US$350 million Idesa contribution. After the Mexico use, even the US$1.0 billion Q3 case leaves thin September cash. Cure-and-continue is not a credible standalone path. It is at most a short bridge into a signed extrajudicial reorganization. The board will not spend scarce cash to cure selected coupons if that delays adhesion or starves the remaining Idesa closing amount and Alagoas payments.

Opening package

The June five-year extension, 100 percent payment-in-kind through December 2028, 200 basis-point coupon cut, no shareholder warrants and no collateral was not a clearing proposal. This opening replaces it. All figures below are parent-company terms unless stated.

• File a plan-to-a-plan extrajudicial reorganization before the reported 24 August expiry, with a 90-day negotiation window, cash controls, information rights and a Mexico leakage covenant.
• Extend 2026–28 financial maturities, including the US$1.0 billion 31 December 2026 standby and letter-of-credit facilities, by five years. Do not cash-pay the standby.
• For 18 months, pay 4 percent cash interest and payment-in-kind the remainder of the existing coupon. Thereafter, pay the existing coupon with no step-up.
• No principal haircut and no mandatory equitization.
• Commit approximately US$1.2 billion of working-capital and letter-of-credit support: about US$900 million to US$1.0 billion by rolling existing letter-of-credit and trade-facility claims, plus about US$200 million to US$300 million of incremental committed capacity. Add a Petrobras naphtha payable extension at a US$500 million cap for up to 180 days at ordinary commercial prices. That Petrobras line is liquidity for Brazilian operations, not a Mexico subsidy, and it sits alongside rather than inside the letter-of-credit roll.
• Count the US$476 million Idesa contribution as the primary already-committed shareholder cash. Ask IG4 for a US$150 million to US$200 million junior backstop or new-money commitment so Petrobras is not the sole remaining sponsor. Creditor new money in the opening is limited to rolling letters of credit plus a modest incremental slice inside the US$1.2 billion; the board is not asking the steering committee for a large cash equity cheque in Round 1.
• Grant creditors 12.5 percent fully diluted warrants on all existing classes, with no step-up in the opening draft. Legacy IG4, Petrobras and free-float holders are diluted pro rata. BAK and BRKM5 minorities are not frozen out; they keep their residual equity and may participate if a later rights offering is required. A 12.5 percent warrant grant does not change voting control between IG4 and Petrobras, and that is not the objective.
• First lien for new money only on eligible inventory, receivables and controlled proceeds. No lien on core Brazilian crackers or other substantial operating property, plant and equipment.
• Minimum liquidity of US$1.0 billion after the remaining Idesa funding. No dividends or buybacks until corporate net leverage is below 3.0x. A 50 percent excess-cash sweep above minimum liquidity and a 75 percent asset-sale sweep.
• Alagoas provisions, remediation reserves and safety payments remain unimpaired and rank ahead of any distribution to shareholders.

First concession

If that package does not clear a steering-committee NPV test, the board’s first move is a single bundle, not a sequence of giveaways.

• Keep the 18-month relief period, but after it ends pay the existing coupon plus 150 basis points rather than a flat existing coupon.
• Raise warrants to 15 percent fully diluted, stepping to 22.5 percent if annual EBITDA falls below US$2.0 billion, liquidity falls below US$750 million to US$1.0 billion, or payment-in-kind continues beyond two years.
• Accept a limited second lien for legacy debt on the same working-capital pools and on selected non-core shares, still not on core Brazilian fixed assets.
• Accept an IG4 cash or backstop number of US$200 million to US$250 million and a Petrobras naphtha or working-capital cap documented at US$500 million, or US$250 million only if IG4 and creditors fill the gap with real new money so combined new working-capital and letter-of-credit support remains at least US$1.0 billion.
• Consent fee of 50 basis points on extended principal, not a coupon holiday.

Narrowest acceptable package

This is the board’s reservation value against RJ, not a gift to sponsors.

• Combined new working-capital and letter-of-credit support of US$1.0 billion to US$1.2 billion from Petrobras, IG4 and creditors together, of which at least the existing letter-of-credit book is rolled and incremental cash or undrawn commitments are enough, after the remaining Idesa use, to hold minimum liquidity of US$1.0 billion. Illustrative split at the reservation value: Petrobras naphtha or working-capital of US$250 million to US$500 million; IG4 junior cash or backstop of US$200 million to US$250 million; creditor incremental new money of about US$150 million to US$250 million on top of rolled letters of credit. Petrobras naphtha may count toward liquidity at a disclosed cap; it still does not replace junior capital.
• Two years of 4 percent cash and approximately 4 percent payment-in-kind, then existing coupon plus 150 to 200 basis points.
• 15 percent fully diluted warrants, stepping to 22.5 percent on the misses above. Stretch to approximately 25 percent only if there is substantial new liquidity and no principal conversion.
• No initial principal haircut. The standby and letter-of-credit runoff are inside the extension, not cash uses.
• First lien for new money on working-capital assets; at most a limited second lien for legacy debt on those pools and selected non-core shares.
• Mexico: separate estate; US$476 million is the hard cap; no further parent cash or guarantees without creditor consent; existing term loan and US$82 million working-capital loan left to the Idesa plan and their collateral, not refinanced from parent cash.
• Alagoas unimpaired. Capex, additional debt, liens, acquisitions and related-party transfers restricted without blocking ordinary feedstock and inventory operations.
• Walk to RJ rather than accept more than 35 percent creditor ownership, or blanket liens over substantially all core Brazilian assets, without real principal cancellation. Immediate heavy equitization at a distressed print transfers upside the Q2 run-rate and the persistent-spread case have not yet disproved.

At US$1.5 billion of normalized EBITDA, corporate net leverage remains about 6.3x on US$9.5 billion of adjusted net debt before payment-in-kind accretion and before the cash drain of the remaining Idesa cheque. At US$2.0 billion, about 4.8x. At US$2.5 billion, about 3.8x. At US$3.0 billion, about 3.2x. At US$4.0 billion, about 2.4x. Strong 2026 spreads in a US$2.7 billion to US$3.3 billion year improve bargaining leverage and cash conversion once the Q2 price and inventory reset stops, but they do not erase default or the refinancing wall. The board will not pretend otherwise.

Political overlay

Verified. Brazil’s first-round election is 4 October, with a possible second round on 25 October. Petrobras is state-controlled and subject to Law 13,303. REIQ and PRESIQ exist as industrial-policy statutes; a provisional polyethylene antidumping measure has been used. Alagoas remains live in federal proceedings and in the company’s disclosed socio-environmental obligations.

Inference, not a guarantee. Election-year concern about jobs, domestic resin supply and industrial capacity raises the execution cost of a disruptive RJ and supports a going-concern extrajudicial reorganization. It does not order Petrobras to rescue Braskem and does not protect today’s ownership percentages. The board will frame any Petrobras support as capped, arm’s-length financing of profitable Brazilian operations, conditional on creditor maturity relief and IG4 burden-sharing. Alagoas safety and remediation cash will not be subordinated to bondholders or shareholders in any package this board will sign.

Outcome probabilities

These are the board’s current probabilities and sum to 100 percent.

Cure-and-continue is a 5 percent tail because the remaining Idesa use removed the cash that would have made it plausible. The 42 percent consensual case is not a claim that the June opening will clear; it is a claim that a 90-day extrajudicial reorganization plus a 15 percent warrant structure still beats RJ for all sides if Petrobras is capped and IG4 writes a junior cheque. The 30 percent RJ case is the cost of missing 24 August.

Single fact that would most change this position

Public confirmation, in a Braskem S.A. or Braskem Idesa filing, that the remaining approximately US$350 million is not incremental parent cash - that it is a restatement of the existing term loan, the US$82 million working-capital facility, or amounts already funded - would restore roughly US$350 million of September liquidity, reopen a narrower cure discussion, and let the board open with a smaller warrant grant. A signed Petrobras naphtha facility at a disclosed cap of at least US$500 million before 24 August would be the next most important fact, but it would not, by itself, reverse the Mexico cash use.

Strongest argument against this board

At US$1.5 billion of normalized EBITDA, even a five-year extension leaves leverage above 6x before payment-in-kind accretion, and the remaining Idesa cheque makes near-term cash worse, not better. Creditors may rationally demand permanent equity or debt conversion rather than warrants on volatile spreads. If that demand comes with real principal cancellation and preserves Alagoas and operations, this board must take it seriously. If it is simply a control transfer at a trough valuation without cancelling principal, RJ remains the better tool for preserving enterprise value.