Brazilian Corporate Debt Faces Turbulence Amid Company-Specific Crises

Market Volatility Hits Brazilian Corporate Bonds

Brazil’s corporate bond market is reportedly experiencing significant turbulence as credit concerns surrounding several major companies drive up borrowing costs across Latin America’s largest economy. According to financial reports, the situation has drawn comparisons to recent jitters in US credit markets following the collapse of auto parts group First Brands.

Market Volatility Hits Brazilian Corporate Bonds
Three Companies at the Center of the Storm
Severe Price Declines Across the Board
Emerging Market Context and Brazilian Specifics
Market Dynamics and Investor Behavior
Company-Specific Challenges
Legal and Regulatory Concerns

Three Companies at the Center of the Storm

Sources indicate that bonds issued by waste management firm Ambipar, petrochemicals giant Braskem, and biofuels producer Raízen have all experienced substantial price declines over the past month. The sell-offs have reportedly sent a chill through Brazil’s corporate credit market, with analysts suggesting the speed and timing reflect broader nervousness in global credit markets.

Jeff Grills, head of US cross markets and emerging markets debt at Aegon Asset Management, reportedly commented that the US credit situation had reminded investors that “accidents can happen anywhere in credit markets.” However, he added that “these are still idiosyncratic situations, Ambipar being the worst… I don’t believe that there is a systemic problem in the Brazilian corporate market, unless there is a growth slowdown.”

Severe Price Declines Across the Board

The report states that Ambipar’s 2031 bonds collapsed to approximately 13 cents on the dollar this month as the company sought protection from creditors ahead of an expected bankruptcy filing. The rout reportedly spread to Braskem’s bonds due in 2041, which have fallen below 40 cents on the dollar, while Raízen’s 2035 debt dropped as low as 75 cents last week. All three companies have reportedly declined to comment on the situation.

Emerging Market Context and Brazilian Specifics

Despite the current turmoil, analysts suggest corporate borrowers in developing nations are mostly still benefiting from a surge in emerging market assets this year. The yield on a JPMorgan index of emerging market corporate dollar debt has reportedly fallen to about 6 percent, representing the lowest premium for holding emerging market debt since 2007.

However, the Brazilian portion of the index has reportedly widened significantly to a spread of 3.4 percentage points this month, up from 2.8 points a month ago. This comes despite investor confidence earlier this year that Brazilian companies were weathering high local interest rates and US tariffs.

Market Dynamics and Investor Behavior

Eric Fine, emerging market debt portfolio manager at VanEck, reportedly noted that the situation demonstrates that generic credit spreads require careful consideration and cannot substitute for analyzing individual company risks. He added that because there is less liquidity in Brazilian bond markets compared to the US, making bonds harder to trade, “people shoot first and ask questions later.”

Company-Specific Challenges

Ambipar’s Dramatic Fall: According to reports, Ambipar’s decline has been particularly spectacular for a company that expanded waste and hazardous clean-up businesses worldwide, culminating in a US listing in 2023 and a debut international bond issuance last year. After reaching an all-time high of R$26.85 per share at the end of 2024, giving the company a market value of $7.4 billion, Ambipar’s Brazilian shares are now reportedly worth less than R$0.60 each.

Marilia Fontes, co-founder of research house Nord Investimentos, reportedly described last year’s surge in Ambipar’s shares as “almost unjustifiable, given their valuation and their peers,” calling the company’s capital structure “delicate.” Investors reportedly grew alarmed over sums invested in a receivables fund linked to the company and its ties to Banco Master, a troubled lender.

Braskem’s Structural Challenges: Sources indicate that Braskem, Latin America’s largest petrochemicals producer, is grappling with a global market glut and unresolved issues related to an urban environmental disaster connected to underground salt mining. These factors have reportedly cast doubts over the company’s ability to manage its $6.8 billion net debt pile without resolving ownership questions.

One investor in both Ambipar and Braskem debt reportedly commented that “people tend to be less forgiving in Latin America. The bar to trust is higher and, because it’s Brazil, people tend to run faster.” The investor added that Braskem was in a better position given its importance to Brazil’s economy and partial ownership by Petrobras, the state-controlled oil company.

Raízen’s Financial Pressures: Reports indicate that Raízen, a listed joint venture between Shell and Brazilian energy and logistics conglomerate Cosan, has struggled financially following a costly expansion. The company has reportedly been selling assets to reduce leverage and recently reiterated to markets that it does not intend to restructure its debt.

Legal and Regulatory Concerns

Vladimir Timerman, chief executive and founder of São Paulo-based activist fund Esh Capital, reportedly suggested that the trio of sell-offs reflects investor concerns over legal uncertainty in Brazil. He stated that “Ambipar’s precautionary measure for protection against creditors should give chills to any creditor in Brazil,” adding that regulatory bodies had reason to act earlier to prevent the current situation.

Market participants will be closely watching how these credit events develop and whether they signal broader challenges for corporate bonds in Brazil or remain contained as company-specific issues within the dollar-denominated debt market.