Brazil’s Braskem bond back to downward path after Fitch cuts rating to junk

SAO PAULO (Reuters) -The price of the most active bond of Brazilian petrochemical Braskem fell again on Friday, a day after ratings agency Fitch cut the firm’s rating to below investment grade citing increased risks related to sinking ground in the city of Maceio.

Fitch cut Braskem’s credit note to “BB+” from “BBB-” late afternoon on Thursday. On Tuesday, Moody’s had also downgraded the firm’s rating, which it already had rated as ‘junk.’

Braskem’s bond due 2033, its most active on Friday, traded at 82.1 cents on the dollar, down from 83.5 cents closing level on Thursday and 91.5 cents in late November.

The bond, which was issued in February, had plunged to a closing record-low of 80.5 cents on the dollar earlier this week, but has gained some ground since then before Fitch’s action.

The company’s bonds and shares had been suffering since late November, as new damage claims about its salt extract operations in Maceio have emerged amid authorities’ risk alerts on one of its disabled mines, which ended breaching on Sunday.

Braskem has spent more than 9 billion reais ($1.82 billion)and provisioned some additional 5 billion reais, since authorities said in 2018 its rock salt operations in Maceio had contributed to sinking ground that made some 60,000 people to be moved, according to city hall.

In another signal of the latest events’ impact on Braskem’s traded debt, the firm’s 2041 bond, its oldest, fell this week to its lowest closing price since January 2016.

Braskem’s shares closed higher on Friday, while Brazil’s benchmark stock index Bovespa ended lower. However, the firm’s shares fell about 9% this month versus about a 2% gain on the Bovespa.

Braskem still holds a “BBB-” investment-grade rating by S&P, with a “negative” outlook.

($1 = 4.9382 reais)

(Reporting by Andre Romani in Sao Paulo; Additional reporting Rodrigo Campos in New York; editing by Diane Craft)