January 20, 2017 / 8:59 PM / a year ago

Fitch LATAM Spotlight: Braskem's Leverage Trending Higher, but to Remain Adequate

(The following statement was released by the rating agency) CHICAGO, January 20 (Fitch) Braskem's business position has improved in a variety of positive ways including a promising start to operations in Mexico, and acceptable leverage levels, according to the latest report in Fitch Ratings' Spotlight series. One report will be released each day through Feb. 6, 2017, following the schedule at the end of this release. Ongoing postponements and delays in new capacity addition should support product prices for polyethylene throughout 2017. Fitch expects PE prices to start trending down in 2018, while polypropylene (PP) spreads in the U.S. are expected to remain solid until mid-2018. "A potential squeeze in spreads resulting from increased naphtha prices following the uptrend of oil prices is a short-term concern," said Debora Jalles, Director at Fitch. Net leverage ratios are expected to remain around 2.5x in the long term. As of Sept. 30 2016 Braskem had a net debt/EBITDA ratio of 1.5x. Fitch forecasts net leverage to increase to 2.2x in 2017 and 2.3x in 2018. Braskem reached a leniency agreement with public authorities in Brazil, U.S. and Switzerland, totalling BRL3.1 billion, which has eliminated uncertainties related to the corruption investigations. Fitch believes additional payments could come from class action in the U.S., yet it should not be significant to Braskem's credit metrics. Fitch's Spotlight Series on Latin American Issuers will be released one report per day as follows: Jan 9th - American Movil S.A.B. de C.V. Jan 10th - GOL Linhas Aereas Inteligentes S.A. Jan 11th - Avianca Holdings S.A. Jan 12th - CEMEX, S.A.B. de C.V. Jan 13th - Companhia Siderurgica Nacional Jan 17th - Marfrig Global Foods S.A. and Minerva S.A. Jan 18th - Grupo IDESA, S.A. de C.V. Jan 19th - Odebrecht Engenharia e Construcao S.A. Jan 20th - Braskem S.A. Jan 23rd - LATAM Airlines Group S.A. Jan 24th - Mexichem, S.A.B. de C.V. Jan 25th - JBS S.A. Jan 26th - Vale S.A. Jan 27th - Empresa Nacional de Telecomunicaciones S.A. Jan 30th - Digicel Group Limited Jan 31st - Petroleos Mexicanos Feb 1st - Petroleo Brasileiro S.A. Feb 2nd - Ecopetrol S.A. Feb 3rd - Petroleos de Venezuela S.A. Feb 6th - Offshore Drilling Holding, S.A. The Spotlight series focuses on fundamental credit concerns, delving into the relative exposure to the main risk factors, as well as implications, for each rating. For more information, a special report titled "Spotlight: Braskem's Leverage Trending Higher" is available on the Fitch Ratings web site at www.fitchratings.com. Contact: Contact: Latin America Spotlight Series Contact: Jay Djemal Director, Head of Credit Research Latin America +1-312-368-3134 Fitch Ratings, Inc. 70 West Madison St. Chicago, IL, 60602 Daniel R. Kastholm, CFA Regional Group Head - Latin America Corporates +1-312-368-2070 Braskem Contact: Debora Jalles Director +1-312-606-2338 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Related Research Spotlight: Braskem's Leverage Trending Higher (High Oil Price a Threat to Spreads in 2017) here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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