Braskem's Credit Crisis: A High-Yield Gamble with High-Risk Outcomes

Braskem, Brazil's largest petrochemical company, is teetering on the edge of a financial abyss. With a debt-to-EBITDA ratio of 10.6x as of Q2 2025—up from 7.98x in March—and liquidity coverage for debt maturities slashed from 61 months to 30 months, the company's credit profile has deteriorated to near-distressed levels. Moody's and Fitch have both downgraded Braskem in 2025, with Fitch's recent cut to BB– signaling a potential slide into speculative-grade territory. For investors in Braskem's high-yield bonds and equity, the question is no longer whether the company can service its debt, but how it will avoid a full-blown restructuring.

A Perfect Storm of Debt and Weak EBITDA

Braskem's financial struggles stem from a confluence of factors. The company's recurring EBITDA plummeted 67% year-over-year to $74 million in Q2 2025, driven by collapsing global polyethylene (PE) and PVC spreads and soaring raw material costs. This has pushed its net debt to $8.5 billion, with cash reserves dwindling to $1.7 billion—a 40% drop from a year ago. The result? A liquidity cushion that now covers just 30 months of debt maturities, compared to 61 months in 2024.

The bond market has priced in this risk. Braskem's 2030 bonds now yield 15.7%, up from 9% in May 2025, with a spread over U.S. Treasuries exceeding 1,000 basis points—a threshold typically reserved for distressed debt.

Restructuring Efforts: A Race Against Time

Braskem's management has outlined a survival strategy: refinancing short-term debt, monetizing non-core assets, and cutting costs. CEO Roberto Ramos has emphasized “spending less” and “improving plant performance,” including closing unprofitable facilities and shifting to higher-margin products. The company is also exploring sale-leasebacks and asset-backed financing, though these options may not address its structural leverage issues.

A potential $1 billion sale of U.S. polypropylene plants to Unipar has sparked debate. While CEO Ramos insists these assets are “critical” to Braskem's green innovation strategy, reports suggest the plants' low margins and reliance on third-party feedstock make them prime candidates for divestiture. Meanwhile, the company's green initiatives, such as its I'm GreenT bio-based resin, have seen a 26% sales increase in Q2 2025—a glimmer of hope in a sector dominated by fossil fuels.

Environmental and Trade Risks: Compounding the Crisis

Braskem's challenges extend beyond balance sheets. The environmental disaster in Alagoas, linked to a salt mine collapse, has added regulatory and reputational risks. Coupled with U.S.-China trade tensions—where Chinese polypropylene producers are flooding Brazil with low-cost resins—Braskem faces a dual threat of margin compression and operational scrutiny.

Trade remedies, including potential antidumping duties against Chinese and U.S. producers, could provide temporary relief. However, these measures are unlikely to offset the broader industry overcapacity and weak demand. Analysts at Fitch warn that without a material improvement in EBITDA by mid-2026, further downgrades are inevitable.

Investment Implications: High Yield, High Risk

For bondholders, Braskem's 15.7% yield on 2030 bonds is tempting but comes with a steep risk premium. The company's liquidity coverage is now barely sufficient to meet obligations until 2028, and its $1 billion credit line matures in 2026. If Braskem fails to secure refinancing or sell assets, a debt restructuring—potentially involving haircuts for creditors—could follow.

Equity investors face an even more precarious outlook. With a market capitalization that has shrunk alongside its cash reserves, Braskem's shares trade at a discount to its intrinsic value but reflect deep uncertainty. While management's focus on green innovation and gas-based production could pay off in the long term, the near-term outlook remains bleak.

Conclusion: A Calculated Bet for the Bold

Braskem's debt crisis is a cautionary tale of overleveraging in a cyclical industry. For investors, the key question is whether the company can execute its restructuring plan swiftly enough to avoid a default. While the high-yield market has priced in significant risk, the potential for a turnaround—driven by asset sales, cost cuts, and green innovation—exists. However, this is a high-stakes bet. Investors should monitor Braskem's Q3 2025 results, its ability to secure refinancing, and the resolution of trade disputes. For now, caution is warranted.