Senior Credit Analyst - Emerging Markets, EM Spreads

Leandro Gubler

Senior Credit Analyst - Emerging Markets

EM Spreads

Credit

<ul>
<li>Key Outcome: Braskem’s sequential EBITDA recovery improves optionality, but the credit remains driven by liquidity preservation, working capital access, and capital structure execution.</li>
<li>Risk/Volatility: Very high leverage, negative FFO, weak liquidity coverage, and the December 2026 standby maturity keep recovery dependent on creditor negotiations.</li>
<li>Valuation Driver: The bond rally reduces margin of safety, leaving the 2031s as the preferred expression for accounts maintaining exposure to resolution upside.</li>
</ul>


Key Outcome: Braskem’s sequential EBITDA recovery improves optionality, but the credit remains driven by liquidity preservation, working capital access, and capital structure execution.
Risk/Volatility: Very high leverage, negative FFO, weak liquidity coverage, and the December 2026 standby maturity keep recovery dependent on creditor negotiations.
Valuation Driver: The bond rally reduces margin of safety, leaving the 2031s as the preferred expression for accounts maintaining exposure to resolution upside.


Braskem 1Q26: Event Risk Drives the Trade

<ul>
<li>
Downgrade on Survival Fears: Braskem is downgraded to Neutral as going-concern warnings and potential court protection shift the credit narrative from valuation to immediate event risk and survival.</li>
<li>
Severe Fundamental Deterioration: Q4 results revealed a 28% sequential EBITDA drop, persistent cash burn, and net leverage surging to 18.52x, severely straining the company's deteriorating liquidity profile.</li>
<li>
Distressed Bond Positioning: With senior unsecured bonds trading in the low $40s, investors should avoid the vulnerable 2081 hybrids, though the 2031 notes offer the most efficient remaining exposure.</li>
</ul>



Downgrade on Survival Fears: Braskem is downgraded to Neutral as going-concern warnings and potential court protection shift the credit narrative from valuation to immediate event risk and survival.

Severe Fundamental Deterioration: Q4 results revealed a 28% sequential EBITDA drop, persistent cash burn, and net leverage surging to 18.52x, severely straining the company's deteriorating liquidity profile.

Distressed Bond Positioning: With senior unsecured bonds trading in the low $40s, investors should avoid the vulnerable 2081 hybrids, though the 2031 notes offer the most efficient remaining exposure.


Braskem 4Q25: Credit Story Turns to Survival

<ul>
<li>Braskem’s Overweight stance is supported by its strategic relevance and government links, with distressed bond prices already reflecting substantial downside risk.</li>
<li>We find better value in lower-priced bonds, especially the 2030 notes yielding 32.0% for a 3.0-year duration, while we see elevated risk in the 2081 hybrids.</li>
<li>Near-Term outcomes hinge on liquidity solutions, policy relief, and January coupon clarity, though recent developments and potential secured financing improve the probability of an alternative resolution.</li>
</ul>


Braskem’s Overweight stance is supported by its strategic relevance and government links, with distressed bond prices already reflecting substantial downside risk.
We find better value in lower-priced bonds, especially the 2030 notes yielding 32.0% for a 3.0-year duration, while we see elevated risk in the 2081 hybrids.
Near-Term outcomes hinge on liquidity solutions, policy relief, and January coupon clarity, though recent developments and potential secured financing improve the probability of an alternative resolution.


Braskem 3Q25: Liquidity Strain Deepens as Bonds Remain in Distressed Territory

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We view Braskem's ESG as "Weak", in line with its scores for the Environmental, Social and Governance pillars. Controversies are "Material", and Disclosure is "Strong".

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We view Braskem's ESG as "Weak", in line with its scores for the Environmental, Social and Governance pillars. Controversies are "Material", and Disclosure is "Strong".

<ul>
<li>Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).</li>
<li>We view Braskem Idesa's ESG as "Adequate", in line with its scores for the Environmental, Social and Governance pillars. Controversies are "Material" and Disclosure is "Strong".</li>
<li>Braskem Idesa (Bakide), a single-asset 75%/25% JV between Braskem and Idesa, is Mexico's largest polyethylene (PE) producer.</li>
</ul>


Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Braskem Idesa's ESG as "Adequate", in line with its scores for the Environmental, Social and Governance pillars. Controversies are "Material" and Disclosure is "Strong".
Braskem Idesa (Bakide), a single-asset 75%/25% JV between Braskem and Idesa, is Mexico's largest polyethylene (PE) producer.


Braskem Idesa - ESG Report - Lucror Analytics

Brazil

Braskem S.A. is a Brazilian petrochemical company and the largest thermoplastic resins producer in the Americas. It specializes in manufacturing polyethylene (PE), polypropylene (PP), and polyvinyl chloride (PVC) resins, along with basic chemical inputs such as ethylene and propylene. The company also offers a bio-based product line made from sugarcane. Braskem is headquartered in São Paulo, Brazil, and was founded in August 2002.

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Braskem (BRKM5 BR)

Braskem 1Q26: Event Risk Drives the Trade

Braskem’s rally has shifted the trade from distressed spread compression to a recovery bet tied to liquidity, creditor talks, and the 2031s.

Leandro Gubler

Braskem 4Q25: Credit Story Turns to Survival

Discover why Braskem's downgrade to Neutral signals a shift from valuation to pure survival amid mounting court protection risks, collapsing...

Leandro Gubler

Braskem 3Q25: Liquidity Strain Deepens as Bonds Remain in Distressed Territory

Braskem’s strategic relevance and distressed bond levels support our Overweight view, with lower-priced notes offering better protection as...

Leandro Gubler

Braskem - ESG Report - Lucror Analytics

We view Braskem's ESG as "Weak", in line with its scores for the Environmental, Social and Governance pillars. Controversies are "Material", and...

Lucror Analytics

Braskem Idesa - ESG Report - Lucror Analytics

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We view Braskem Idesa's ESG as...

Lucror Analytics

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