Fitch: Braskem's Ratings Unaffected by Solvay Indupa Acquisition

RIO DE JANEIRO--()--Braskem S.A. (Braskem)'s recent announcement that it had reached an agreement to acquire Solvay Indupa S.A.I.C. (Solvay Indupa) is seen as neutral to credit quality. Braskem could pay approximately USD50 million in cash, including minority stake, and assume USD250 million of debt for this acquisition, which is still subject to approval by antitrust agencies in Brazil and Argentina.

Despite the small size, the acquisition is strategically positive as it strengthens Braskem's vinyls chain and business position in Brazil and in Latin America, with an expected market-share of 75% and 65% in Brazil and Argentina, respectively. Braskem will increase its annual production capacity to 1,250 kton of PVC and to 890 kton of Caustic Soda from 710 kton of PVC and 510 kton, respectively.

Solvay Indupa's estimated EBITDA during 2013 is approximately USD70 million. In accordance with Braskem, no relevant Capex is associated with these units and therefore should not significantly affect Braskem's free cash flow generation. Favorably, Braskem has a good track record of integrating acquisitions and increasing the profitability of the acquired companies through a variety of initiatives.

Leverage is expected to remain unchanged. The transaction does not change the company's already high financial leverage. On a pro-forma basis and considering Fitch's criteria, Braskem net leverage ratio, measured by net debt/EBITDA, would remain unchanged at 4.2 times (x) during the latest 12 months (LTM) ended Sept. 30, 2013.

Fitch currently rates Braskem as follows:

Braskem S.A.

--Long-term foreign currency Issuer Default Rating (IDR) 'BBB-';

--Long-term local currency IDR 'BBB-';

--Long-term national rating 'AA+(bra)';

--Unsecured senior notes due 2014 and 2017 'BBB-'.

Braskem International

--Long-term foreign currency IDR 'BBB-';

--Unsecured senior notes due in 2015 'BBB-'.

Braskem Finance Limited

--Long-term foreign currency IDR 'BBB-';

--Unsecured senior notes due 2018, 2020, 2021 and 2022 'BBB-';

--Unsecured senior perpetual bonds 'BBB-'.

Braskem America Finance Company

--Long-term local and foreign currency IDR 'BBB-';

--Unsecured senior notes due 2041 'BBB-'.

The corporate Rating Outlook is Negative.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Debora Jalles, +55-21-4503-2629
Director
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - Sala 401 B
Centro - Rio de Janeiro - RJ - CEP: 20010-010
or
Secondary Analyst
Lucas Aristizabal, +1 312-368-3260
Director
or
Media Relations, New York
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Debora Jalles, +55-21-4503-2629
Director
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - Sala 401 B
Centro - Rio de Janeiro - RJ - CEP: 20010-010
or
Secondary Analyst
Lucas Aristizabal, +1 312-368-3260
Director
or
Media Relations, New York
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com