June 7, 2019 / 10:21 PM / 10 days ago

Brazilian state sues Braskem over compensation for damage from mining

SAO PAULO, June 7 (Reuters) - Prosecutors for the Brazilian northeastern state of Alagoas filed a lawsuit against the country’s largest petrochemical company, Braskem SA, seeking to guarantee compensation for damages caused by the firm, the Alagoas government said on Friday.

In the lawsuit, the state asks a local court to block any attempt from Braskem’s controlling shareholder, the Odebrecht conglomerate, to spin off the business based in Alagoas to facilitate a possible deal to sell the petrochemical company.

Odebrecht, which is struggling to restructuring its 80 billion reais ($20.63 billion) in debt, had plans to sell a controlling stake in Braskem. Local newspaper O Globo said this week that the construction group could separate the business in Alagoas as a way to facilitate a deal.

The Alagoas government says Braskem’s mining activities in the state have caused hundreds of residences and commercial buildings in three villages to present cracks. State prosecutors gave the lawsuit a value of 30 billion reais.

“Braskem cannot be sold in parts. They cannot spin off the Alagoas part and let it be the sole party responsible to compensate families and the state for the damage caused,” Alagoas’ governor, Renan Filho, said in a statement.

Earlier this week, European holding company LyondellBasell Industries NV announced the end of talks with Odebrecht for a controlling stake in Braskem. It did not disclose reasons for its decision.

Braskem declined to comment. Odebrecht did not comment on the possible spin-off. It only said that currently there are no other negotiations under way to sell the stake.

The announced failure of the deal to sell Braskem to LyondellBasell is expected to further deteriorate Odebrecht’s finances.

$1 = 3.8773 reais Reporting by Alberto Alerigi; writing by Marcelo Teixeira Editing by Leslie Adler

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