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Rating Action:

Moody's places Braskem's ratings under review for downgrade

17 Jul 2017

New York, July 17, 2017 -- Moody's Investors Service ("Moody's") has placed Braskem S.A. ("Braskem")'s Ba1 corporate family rating and the ratings on the foreign currency debt issuances of Braskem Finance Ltd and Braskem America Finance Company, fully guaranteed by Braskem S.A., under review for downgrade.

Ratings Actions:

..Issuer: : Braskem S.A.

LT Corporate Family Rating, Placed Under Review for Downgrade, currently Ba1

..Issuer: Braskem America Finance Company

USD 750 mm GTD Global Senior Unsecured notes due 2041, Placed Under Review for Downgrade, currently Ba1

..Issuer: Braskem Finance Ltd

USD 500 mm GTD Global Senior Unsecured notes due 2018, Placed Under Review for Downgrade, currently Ba1

USD 750 mm GTD Global Senior Unsecured notes due 2020, Placed Under Review for Downgrade, currently Ba1

USD 1000 mm GTD Global Senior Unsecured notes due 2021, Placed Under Review for Downgrade, currently Ba1

USD 500 mm GTD Global Senior Unsecured notes due 2022, Placed Under Review for Downgrade, currently Ba1

USD 750 mm GTD Global Senior Unsecured notes due 2024, Placed Under Review for Downgrade, currently Ba1

USD 700 mm GTD Global Senior Unsecured notes (perpetual), Placed Under Review for Downgrade, currently Ba1

Outlook Actions:

.. Issuer:: Braskem S.A:

....Outlook, Changed To Under Review for Downgrade From Negative

..Issuer: Braskem America Finance Company:

....Outlook, Changed To Under Review for Downgrade From Negative

..Issuer: Braskem Finance Ltd

....Outlook, Changed To Under Review for Downgrade From Negative

RATINGS RATIONALE

The review for downgrade reflects the fact that Braskem has not yet filed audited financial statements for fiscal-year 2016 and our concern about potential liquidity pressures that could arise as a consequence. Moody's acknowledges that the company is working with its auditors to release these statements as soon as possible.

On 22 February 2017 Braskem announced that it would postpone the filing of audited financial statements related to the 2016 fiscal year. The reason was the need for additional analysis of internal processes and controls as a consequence of the conclusion of the Global Settlement with authorities under the scope of the "Lava-Jato" investigations announced on December 21, 2016. On March 28, 2017, Braskem announced that independent auditors had not yet concluded their work regarding checks of internal processes and controls, and once again postponed the filing of audited financials.

Even though Braskem has released unaudited results for FY 2016 and 1Q17 on March 28 and May 15, respectively, the company is not in compliance with CVM and SEC reporting regulations, as well as under certain capital market debt agreements, which include the release of audited annual statements by April 30, 2017. The SEC has extended the filing deadline for the 20-F report until mid-November 2017.

Extended delays in the release of audited annual financial statements might lead bondholders to take actions that might lead to a declaration of default, subject to a notification from the holders of at least 25% of the principal amount outstanding for each of the notes. If a declaration of default is received by the company, Braskem has a 60-day grace period to publish audited financial statements.

The review for downgrade will take into consideration: (a) the ability of the company to publish audited financial statements without any restrictions by independent auditors; and (b) material changes to unaudited results released for FY 2016 and 1Q17.

Moody's aims to conclude the review within 90 days.

WHAT COULD CHANGE THE RATING UP / DOWN

Given the review for downgrade, Moody's believes an upgrade of the Braskem's ratings is unlikely in the short term. Nevertheless, the ratings could be confirmed if Braskem is able to address its near term liquidity risks as a result of the non-publication of audited financial statements, which also limits capital markets access. Conversely, the ratings could be downgraded if Braskem remains unable to file its audited financial statements. Furthermore, the rating could be negatively affected if Braskem faces material liabilities from litigations and class actions in addition to the amount related to the Global Agreement signed in December 2016.

The principal methodology used in these ratings was Global Chemical Industry Rating Methodology published in December 2013. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Braskem S.A. (Braskem) is the largest producer of thermoplastic resins (Polyethylene, Polypropylene and Polyvinyl chloride) in the Americas, with annual production capacity of 19 million tons. Braskem also produces caustic soda, chlorine and basic petrochemicals as ethylene, propylene, gasoline, among others. In the LTM ended March 2017, Braskem reported consolidated net revenues of BRL 48.4 billion (USD 14.7 billion).

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Barbara Mattos, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653

Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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