Braskem(US:BAK)2021-05-13 16:00Debt and Financial Obligations - As of December 31, 2020, the company had R$1,005.4 million in loans subject to the CDI rate, R$673.6 million subject to the IPCA, and R$8,075.9 million subject to LIBOR[275]. - The company's foreign-currency debt in U.S. dollars represented 96.8% of its total indebtedness as of December 31, 2020, which poses a risk of default if payments are not made[277]. - As of December 31, 2020, Braskem had consolidated corporate debt of R$41,968.2 million (US$8,075.9 million) and consolidated Braskem Idesa debt related to the Mexico Complex of R$12,059.2 million (US$2,320.6 million)[332]. - Of the consolidated corporate debt, R$39,663.1 million (US$7,632.4 million) was unsecured debt of Braskem's subsidiaries and special purpose entities[332]. - Payments on Braskem's guarantees will be junior to secured debt obligations, affecting the claim priority of debt securities holders[328]. - Braskem may rely on cash flows from subsidiaries and jointly controlled companies to service payments on its guarantees, which could be impacted by those entities' financial conditions[333]. - Braskem's obligations under the guarantees of the outstanding debt securities are subordinated to certain statutory preferences, which may affect the ability of holders to collect amounts due[334]. Regulatory and Economic Risks - Changes in Brazilian tax laws could increase the company's tax burden, negatively impacting gross margin and overall financial performance[278]. - The company is exposed to risks from political and economic conditions in Mexico, which could adversely affect operations and financial condition[279]. - The company faces potential increases in servicing costs for foreign currency-denominated debt due to Brazilian government exchange control policies[276]. - The company's operations may be impacted by the political landscape in Mexico, including potential changes in laws and regulations that could affect private investment in key sectors[293]. - The Mexican economy is increasingly correlated with the United States, and adverse conditions in the U.S. could significantly impact the financial performance of the company[297]. - Increased criminal activity in Mexico, particularly drug-related violence, poses risks to the company's operations and financing costs, potentially affecting revenue generation[298]. - Changes in Brazilian foreign exchange regulations could impact the company's ability to remit payments outside Brazil, affecting obligations under shares and debt securities[313]. - Restrictions on capital movement out of Brazil may impair the ability to make payments on shares and debt securities, potentially affecting financial condition[311]. Market and Investment Considerations - The Brazilian securities markets are smaller, less liquid, and more volatile than major securities markets, which may negatively impact the market price of Braskem's shares and ADSs[323]. - Economic developments in other countries can adversely affect the trading price of Brazilian securities, including Braskem's common shares and ADSs[324]. - The persistence of the COVID-19 pandemic could negatively impact the market value of securities of Brazilian issuers, including Braskem's shares and ADSs[326]. - Holders of ADSs or class A preferred shares in the U.S. may not have the same preemptive rights as Brazilian shareholders, potentially leading to dilution of their equity interest[321]. - Brazilian bankruptcy laws may be less favorable to holders of Braskem's shares and outstanding notes compared to those in other jurisdictions, potentially limiting creditor rights[335]. Operational Agreements and Supply Chain - The company has entered into a 15-year natural gas transport service agreement with Cenagas, contingent upon further negotiations regarding the ethane supply agreement with Pemex TRI[284]. - The company is currently unable to predict the outcome of ongoing discussions with Pemex TRI regarding the ethane supply agreement, which remains in full force[284]. - The company sources nearly all ethane for polyethylene production from Pemex TRI under a complex long-term supply agreement, which may lead to interpretation differences that could adversely affect financial results[299]. - The company is currently importing additional ethane through a private terminal and is considering the development of a new Ethane Import Terminal to increase production capacity[300]. - The construction of the Ethane Import Terminal involves significant risks, including potential delays and the need for regulatory approvals, which could impact operations[301]. Dividend and Shareholder Rights - The company is required to distribute 25% of adjusted net profit as mandatory dividends, but this may be suspended if the board determines it is inadvisable due to financial conditions[305]. - Holders of class A preferred shares and ADSs have limited voting rights and may not be able to influence corporate transactions, including mergers or dividend declarations[306].