Braskem plunges after hiring advisors in bid to boost finances

Braskem's stock price fell 14.7% to its lowest level since April 2003, following the company's announcement of seeking financial and legal advisors to improve its capital structure amid a prolonged downturn in Brazil's chemical industry.

The company is facing severe financial difficulties, exacerbated by a devastating salt mine collapse that contributed to the loss of its investment-grade credit rating.

Credit ratings agencies, including S&P Global, Moody's, and Fitch, have downgraded Braskem's credit ratings due to concerns over its cash flow and mounting debt, now totaling $8.5 billion.

Investors are cautioned to approach Braskem with care as the company attempts to navigate these substantial financial obstacles.

Recommendation Rating: Caution Advised

Braskem (NYSE: BAK) experienced a significant drop of 14.7% in its stock price during Friday’s trading session, marking its lowest closing price since April 2003. This decline follows the company's announcement that it has engaged financial and legal advisors to explore options for enhancing its capital structure. The company is currently facing challenges stemming from an extended downturn in Brazil’s chemical industry, which is projected to persist for several more years.

In addition to industry-wide struggles, Braskem has been impacted by the catastrophic collapse of a salt mine in Alagoas, Brazil, earlier this year, which resulted in the loss of its investment-grade credit rating.

According to a report from Bloomberg, Braskem has initiated discussions with a consortium of banks to renegotiate a $1 billion unsecured credit facility set to mature in late 2024.

Furthermore, S&P Global Ratings has downgraded Braskem’s credit rating from BB- to B+, with a negative outlook. This downgrade reflects concerns that the company's current strategies aimed at improving profitability and liquidity may fall short in addressing its cash flow issues in the near term.

Moody’s and Fitch had already lowered their ratings on Braskem following disappointing Q2 results, which revealed ongoing cash burn and an increase in debt levels to $8.5 billion.

Investors are advised to exercise caution as Braskem navigates these significant financial challenges.