Braskem shares BRKM5.SA fell as much as 4.5% after the announcement, making them the worst performers on Brazil's benchmark stock index Bovespa .BVSP, which was up 1%.
The move, however, did not come as a surprise given Braskem's longstanding debt issues, with Fitch and Moody's having recently downgraded the company's credit ratings.
Reuters reported earlier this month that the petrochemical giant was in advanced talks to file for an out-of-court restructuring in Brazil before the end of August, as a 60-day emergency protection was set to expire.
"We think the news was already expected, given the end of the injunction that granted the 60-day protection," Citi analysts said in a note to clients.
Potential share offering and ownership
Braskem Idesa, a joint venture between the Brazilian firm and Mexico's Grupo Idesa, filed last week for Chapter 11 bankruptcy protection in the United States.
The out-of-court restructuring proposal is set to be developed within a 90-day period, three sources familiar with the matter told Reuters on condition of anonymity.
The plan may include a follow-up share offering, potentially paving the way for a capital increase involving external investors, the sources added.
Control of Braskem is shared by private equity firm IG4 Capital, which recently acquired a stake from engineering group Novonor, and state-run oil company Petrobras PETR3.SA.
UBS BB analysts said that a final resolution to the company's restructuring process may take time, but the absence of an immediate capital injection reduces the risk of shareholder dilution for now.
Braskem said the out-of-court proceeding was limited to the restructuring of its financial liabilities and would not affect obligations to suppliers, customers or other stakeholders.
Board approves out-of-court restructuring filing
The board of directors of Brazilian petrochemical company Braskem BRKM3.SA has approved filing for an out-of-court restructuring to renegotiate around $10.9 billion of unsecured debt, it said in a securities filing on Monday.
Braskem, Latin America's largest petrochemical firm, has struggled with a prolonged downturn in the sector and a disaster linked to its salt mines in northeastern Brazil, both of which severely weakened its cash position.
The company will file for out-of-court restructuring once the relevant documentation is finalized, it added.
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