The head of Brazil’s state-controlled oil company said she would only consider injecting more money into debt-ridden petrochemicals maker Braskem SA if its troubled partner in the company sold to a new investor.
Petroleo Brasileiro SA, as the company is formally known, wants to avoid nationalizing Braskem, Chief Executive Officer Magda Chambriard said in an interview. And its partner, the cash-strapped Brazilian conglomerate Novonor SA, can’t afford to increase its stake. So someone else will need to step in, she said.
“Given Novonor’s financial situation, how would it be able to make a contribution?” she said.
Braskem has been hit by global overcapacity in the petrochemical industry, fallout from an environmental disaster that cost it its investment grade, and more recently, a bond selloff fueled by takeover fears linked to Brazilian tycoon Nelson Tanure, known for his investments in distressed assets.
Petrobras sees potential synergies with Braskem, particularly in renewable fuels, and has been looking for a bigger role in managing Latin America’s leading petrochemicals producer.
“There’s no way for the world’s sixth-largest petrochemicals company not to work out,” said Chambriard.
Novonor has been seeking to divest its Braskem stake as part of a long-running restructuring process following Brazil’s notorious Carwash corruption scandal, when it used its Braskem shares as collateral for unpaid debts.
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Petrobras is Braskem’s second-largest shareholder with 47% of common shares and 36.1% of the total capital. Novonor, formerly known as Odebrecht, controls the company with 50.1% of common shares and 38.3% of the total capital. The groups co-own Braskem through a shareholders agreement.
Any new investor must commit to “an acceptable shareholders agreement,” said Chambriard, adding that she won’t agree to terms that allow a partner to operate without its input.
Petrobras was surprised by news of a potential sale of Braskem’s polyethylene business in the US to Unipar Carbocloro. Chambriard criticized Braskem for decentralizing its management to the point of negotiating an asset without authorization of one of its main partners.
Discussions about Braskem’s options — which include listing Braskem shares on the Novo Mercado section of the Sao Paulo stock exchange that has stricter governance rules and a unique class of shares, as well as splitting up the company’s assets — are only in early stages, she said.