Brazil's government and banks in talks to take Novonor's Braskem stake, sources say
Novonor pressured to divest Braskem stake due to debt collateral, sources say
Banks propose private equity fund to manage Braskem shares -sources
Challenges include Petrobras partnership and Maceio disaster aftermath
By Luciana Magalhaes, Marcela Ayres and Rodrigo Viga Gaier
SAO PAULO, Nov 26 (Reuters) -Brazil's government and several of its largest commercial banks are working on a plan to speed the divestment of engineering group Novonor's majority stake in Braskem BRKM5.SA, Latin America's largest petrochemical company, according to six people familiar with the talks.
Novonor, which changed its name from Odebrecht after a major graft scandal nearly a decade ago, has been exploring a sale for years but failed repeatedly to get a deal across the line.
The group has been under pressure to disinvest because, at the height of the "Car Wash" corruption scandal, it put up its Braskem shares as collateral for 15 billion reais ($2.6 billion) in bank debt, including money owed to the state development bank, BNDES. Today, the shares are worth less than a third of the outstanding debt.
Rather than a simple swap of Novonor debt for Braskem shares, as first proposed, the prevailing idea among creditor banks today is to consolidate the shares pledged as collateral into a private equity fund controlled by the banks.
The fund would be managed by a seasoned executive with the capital and expertise to make investments for a turnaround, potentially boosting Braskem's market value, said three of the six people, who requested anonymity because the negotiations are private.
The leftist government of President Luiz Inacio Lula da Silva, through the BNDES, is leading some of those talks, sources say, with an eye to maintaining influence through a shareholder agreement involving state-run oil firm Petrobras PETR4.SA, Braskem's second-largest shareholder.
In an interview with Reuters, BNDES President Aloizio Mercadante confirmed the interest in solving Braskem's standoff.
"A solution for Braskem is in progress," said Mercadante. "All creditor banks are interested, and so is Petrobras," he added, without giving details or specifying a timeline for negotiations.
Braskem's other creditor banks, Bradesco BBDC4.SA, Itau Unibanco ITUB4.SA, Banco do Brasil BBAS3.SA and Santander SANB3.SA, declined to comment for this story.
Novonor, which in May said in a statement it was engaged in selling its stake in Braskem, declined to comment.
Sources said Novonor would like to keep a small stake in the petrochemical company, but not all banks agree with that.
The engineering group holds 50.1% of Braskem's voting shares and 38.3% of total shares.
Due to challenges in the petrochemical sector and a string of domestic setbacks, including environmental issues, Braskem's market value plunged to around 12 billion reais, reducing the value of Novonor's shares to less than 5 billion reais.
"For these debts to be paid, the value of Braskem's shares need to appreciate," said one of the sources familiar with the discussions, calculating the exit share price for banks would be around 60 reais, about four times the current stock price.
TROUBLE WITH SUITORS
The sale of most of Novonor's stake to a third party that would share control with Petrobras is still not completely ruled out, despite a string of failed attempts, the sources said.
However, selling control of Braskem continues to be challenging given the shareholder agreement with Petrobras, according to analysts and people involved in the transaction.
"Anyone acquiring Braskem will have to deal with a partner whose interests will not necessarily be aligned with their own," said Ricardo Schweitzer, an independent financial analyst.
Braskem is also still dealing with the aftermath of a 2018 disaster in Maceio, the capital of Alagoas state, where officials say the company's salt mines destabilized the ground, cracking buildings and forcing tens of thousands of residents from their homes. In a recent statement, Braskem said it has always acted in line with the laws and regulations of the sector.
In the last six years, Novonor engaged in unsuccessful talks with LyondellBasell Industries LYB.N as well as Brazilian groups Unipar and J&F Investimentos.
One person familiar with the situation told Reuters that LyondellBasell gave up on the deal due to uncertainties related to an investigation into the Maceio disaster. LyondellBasell did not respond to a request for comment.
In 2023, Abu Dhabi's National Oil Co (Adnoc) and Apollo Global Management made a joint offer for up to 37.5 billion reais to buy all of the company's shares, before negotiations fell through. Adnoc continued negotiating alone, offering to buy only Novonor's stake in the company, but also ended talks as the situation in Maceio became more dramatic, two sources said.
Two failed bidders told Reuters on condition of anonymity that it was difficult buying such a large stake of a company co-owned with state-run Petrobras. The others declined to comment or did not respond to requests for comments.
($1 = 5.8050 reais)
Reporting by Luciana Magalhaes in Sao Paulo, Marcela Ayres in Brasilia and Rodrigo Viga Gaier in Rio de Janeiro
Additional reporting by Paula Laier in Sao Paulo
Editing by Brad Haynes and Matthew Lewis
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