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Braskem SA was downgraded to Ba2 from Ba1 by Moody’s on the back of “potential heightened risks” regarding the mine collapse at a time of “strained credit metrics and weak cash generation”. The rating agency highlighted the petrochemical downcycle and continued subdued operations of Braskem in Mexico as key factors that could hurt its metrics and cashflows. The recent events regarding the mine’s collapse may lead to an additional provision of BRL 1bn ($200mn) for urgent relief and new security areas as requested in a civil action case. Total provisions related to this incident amount to BRL 14.4bn ($2.9bn), of which BRL 9.2bn ($1.9bn) have been disbursed through September 2023. Moody’s notes that while the provision did not put Braskem’s liquidity at risk, it did reduce the cushion to ride through the downcycle. While Braksem is said to have a “robust cash position” with total cash of BRL 18.7bn ($3.8bn) to meet such provisions, its high gross leverage and negative free cash flows could hurt its finances.
Braskem’s dollar bonds continue to drop – its 7.25% 2033s fell 1.7 points to 80.6, yielding 10.6%.