Fitch Affirms Braskem's IDR at 'BBB-'; Outlook Revised to Negative

  Fitch Affirms Braskem's IDR at 'BBB-'; Outlook Revised to Negative

Business Wire

RIO DE JANEIRO -- October 26, 2012

Fitch Ratings has affirmed the foreign and local currency Issuer Default
Ratings (IDRs) of Braskem S.A. (Braskem) and its subsidiaries at 'BBB-', as
well as its 'AA+ (bra)' national scale rating. Fitch has revised the Rating
Outlook to Negative from Stable. A full list of rating actions follows at the
end of this release.

The Negative Rating Outlook reflects Fitch's concern about Braskem's ability
to lower its elevated leverage levels, given the poor outlook of the
petrochemical spread with naphta prices. Additional challenges for the company
are to recover its market-share while implementing price increases. A
downgrade is likely if the company's net leverage continues to exceed 3.0x in
2013.

Braskem's investment grade ratings reflect its leading position in the Latin
American petrochemical sector, as the sole thermoplastic resin producer in
Brazil. Further factored into the company's ratings are its strong liquidity
position and manageable debt schedule amortization profile. Grupo Odebrecht
and Petroleo Brasileiro S.A (Petrobras; local and foreign currency IDR of
'BBB', Stable Outlook by Fitch) ownership stakes in Braskem of 38.3% and
35.8%, respectively, are also positive for the ratings.

Robust Business Position Has Not Offset Its High Production Costs

The recently soaring naphta costs amid increasing oil prices has narrowed
petrochemical spreads and eroded Braskem's profitability. The company's
exposure to naphta prices, which represents 72% of Braskem total feedstock,
positioned it as high cost producer. During 2011 and the latest 12 months
(LTM) period ended June 30, 2012, Braskem's naphta prices in Brazilian reais
increased by 19% and 12%, respectively. Braskem has not been able to pass
through cost increases due to fierce competition from imports, despite having
a market position in Brazil of almost 100% in thermoplastic resins production
and about 71% of the domestic sales market. Initiatives by the Brazil
government to support the competitiveness of the local industry should help
the company in the future. These measures include the termination of tax
incentives that states were giving to imported products, as well as an
increase in import tariffs for several products, including the polyethylene,
to 20% from 14%.

Challenging Scenario Halts Operating Cash Flow Recovery

The scenario of decreasing petrochemical spread, foreign exchange
strengthening, weak local demand, and stiff competition from imports
significantly limited Braskem's operating cash flow generation in 2011 and in
2012. Braskem generated BRL1.3 billion in funds from operations (FFO) and
BRL3.7 billion in EBITDA in 2011, compared to BRL2.8 billion and BRL4.1
billion in 2010, respectively. During the LTM ended June 30, 2012, Braskem's
FFO was BRL738 million and its EBITDA was BRL3.3 billion. As a consequence of
the aforementioned factors, Braskem's EBITDA margin fell to 9.5% during the
LTM and 11.3% in 2011, from 14.6% in 2010 and 16.2% in 2009.

High Leverage For The Rating Category

Braskem's leverage is high for the rating category. If the company' fails to
bring net leverage to around 3.0x in the medium term, a ratings downgrade is
likely. As of June 30, 2012, Braskem's leverage ratio as measured by net
adjusted debt-to-EBITDA was 4.6x, an increase from 3.7x at the end of 2011 and
2.9x in 2010.

Proactive Liability Management/Robust Liquidity

Braskem's management has been adopting a conservative and pro-active financial
strategy to limit the risks associated to its business exposure to a cyclic
and capital intensive industry. As a result, the company has a robust
liquidity position and a manageable debt amortization profile. As of June 30,
2012, Braskem had BRL3.5 billion of cash and marketable securities. The
company's liquidity position is further supported by USD600 million of undrawn
standby credit lines due in 2015 and 2016, without material adverse change
clauses. These levels of liquidity compare with BRL1.6 billion of short-term
debt. As of June 30, 2012, Braskem had BRL18.4 billion of total adjusted debt.
This debt incorporates BRL1.6 billion debt of tax related debt (Refis).

Key Rating Drivers

Braskem's inability to increase its cash flow generation or to reduce leverage
in the medium term will lead to a rating downgrade. Braskem's performance is
strongly focused on the Brazilian economy, as around 65% of its revenues are
generated in the local market. A downturn of the economy would weaken the
company's results and could also result in a negative rating action.

A positive rating action is not likely until the company significantly
improves its operational performance and/or substantially lowers its financial
obligations.

Fitch has affirmed and revised the Outlook to Negative for the following
ratings:

Braskem S.A.

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

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

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

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

Braskem International

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

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

Braskem Finance Limited

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

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

-- Unsecured senior perpetual bonds at 'BBB-'.

Braskem America Finance Company

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

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

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

-- 'Corporate Rating Methodology'(Aug. 8, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

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Contact:

Fitch Ratings Brasil Ltda.
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Director
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Centro - Rio de Janeiro - RJ
or
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