Published on 16 July 2025 17:41:28 GMT

(Bloomberg) -- Braskem SA’s dollar bonds are under renewed pressure after the Brazilian state of Alagoas filed a 4 billion-real ($717 million) lawsuit tied to damage caused by the collapse of one of the company’s mines.

It’s the latest chapter of an environmental disaster that has dragged on for years in northeastern Brazil, costing the petrochemical giant its investment-grade status in 2023. The new lawsuit, filed last week, is seeking compensation for damages suffered by residents living along the edge of the affected zone in Maceio, Alagoas said in a statement. Braskem’s 2034 notes fell 3 cents on Monday following the news.

Braskem said it learned about the new suit through the media, and that it will “evaluate and take the pertinent measures” while keeping the market informed, according to a statement Friday. It declined to comment further.

“We don’t know how this will unfold,” said Filipe Botelho, an analyst at Lucror Analytics. The new lawsuit was likely not expected by bondholders and could keep debt under pressure in the short term, he added.

The legal action comes on top of investor concerns over a potential takeover by tycoon Nelson Tanure, which has triggered fear of a debt restructuring. On average, Braskem’s dollar bonds have handed investors a 3.3% loss in the past month, lagging most LatAm corporate bonds, which returned 0.8% in the same period.

“For sure it’s a name that has traded on headlines, so any additional noise like the Alagoas news, may interfere,” said Arturo Galindo, an analyst at BCP Securities. “We still see bond pricing mostly pressured by the Tanure interest.”

Tanure is a veteran investor well-known for making distress plays including Oi SA and Light SA. Even though he has not pushed for a restructuring, investors have signaled concern that his reputation as a distressed debt investor could lead to a “haircut” for bondholders.

His bid comes after years of efforts by troubled industrial conglomerate Novonor SA — formerly known as Odebrecht — to sell its stake in Braskem. A potential deal with Abu Dhabi’s Adnoc fell through in May 2024, dashing hopes that had previously helped drive a rally in Braskem’s bonds.

Local media has reported that a binding offer from Tanure will depend on a definitive agreement regarding the compensation Braskem owes for the soil subsidence in the state of Alagoas.

A spokesperson for Tanure declined to comment.

In late January, Braskem raised provisions related to the Alagoas disaster by 1.3 billion reais, bringing the total to approximately 18 billion reais, company filings show.

Despite the sizable increase, the adjustment had a limited impact on the company’s earnings, as the disbursements are expected to be spread over more than a decade, allowing the costs to be absorbed more gradually, Fitch Ratings said in a report in February.

It’s unclear how much the new case will add to needed provisions. According to BCP’s Galindo, the company has likely already set aside part of the amount demanded in the new lawsuit, though perhaps not the full sum. Lucror’s Botelho said payments could probably come in installments, softening their impact on the balance sheet.

Braskem said last month that 4.22 billion reais had already been paid out in compensation and financial aid since the creation of its Financial Compensation and Relocation Support Program.

“A larger contingent liability probably makes any potential buyer pause a little,” said Omotunde Lawal, head of emerging-markets corporate debt at Barings.

By Giovanna Bellotti Azevedo and Rachel Gamarski