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Investing.com -- Moody’s Ratings has downgraded Braskem S.A.’s Corporate Family Rating to Caa3 from B2 on Tuesday, while maintaining a negative outlook.
The rating action follows Braskem’s announcement that it has hired financial and legal advisors to explore economic-financial alternatives to optimize its capital structure. Moody’s views this move as increasing the risk of distressed exchanges due to Braskem’s ongoing cash burn and weak operations.
In the twelve months ending June 2025, Braskem’s Moody’s-adjusted leverage (including Mexico) reached 15.3x, with negative free cash flow of BRL8.8 billion. This poor performance reflects weak operational results and disbursements related to provisions in Alagoas.
Without protectionism measures to improve EBITDA, Moody’s expects Braskem’s adjusted leverage to remain between 11x-13.5x over the next 12-18 months. The company’s EBITDA continues to be strained by petrochemical spreads, despite ongoing initiatives to improve profitability.
Free cash flow generation will remain under pressure due to weak operations, remaining Alagoas-related disbursements, and investments in the company’s transformation program aimed at long-term competitiveness.
As of June 2025, Braskem had total cash of BRL10.3 billion, a $1 billion (BRL5.7 billion) committed credit facility due in December 2026, and only BRL1.9 billion in debt maturing through the end of 2026, including Mexico’s debt.
The Caa3 rating acknowledges Braskem’s position as the largest petrochemical company in Brazil and the Americas in terms of resin production capacity. The company maintains historically above-industry-average operating margins due to high capacity utilization rates, long-term client relationships, and product customization.
The rating is constrained by deteriorating credit metrics since late 2022, significant cash burn, weak global industry conditions, and high exposure to petrochemical spread volatility. Additional concerns include dependence on PETROBRAS and PEMEX for raw material supply, potential additional liabilities related to Alagoas, subdued operations in Mexico, and shareholders’ intention to divest the business.
Moody’s indicated that further downgrades could occur if Braskem enters transactions leading to creditor losses higher than those associated with the Caa3 rating. An upgrade is unlikely in the short term given the negative outlook.
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