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Highlights

The New York Stock Exchange has suspended trading of Braskem's American depository shares and will initiate delisting procedures because the Brazilian petrochemical producer will not be able to file its 2017 annual report with the US Securities and Exchange Commission by an extended deadline this week, Braskem said Monday.

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"The board of directors and senior management will continue to dedicate significant efforts and resources and are working towards filing the 2017 20-F and our annual report on Form 20-F for the year ended December 31, 2018 as expeditiously as possible, in order to resume trading of the company's ADS on the NYSE," Braskem said in a statement.

Braskem's shares will be available to trade over the counter "as soon as possible."

A 20-F is an annual report that must be filed by all foreign private issuers with shares traded on US exchanges by certain deadlines. Braskem missed a March deadline and the New York Stock Exchange extended it to May 16.

Last week, Pedro Teixeira Carvalho, Braskem's investor relations officer, said during the company's quarterly earnings call that the company was working hard to file the report on time, but could not be sure of meeting the deadline. He said Braskem needed to assess "consistency of the control environment," and a 20-F has an internal controls component that needs review "to make sure that we are reporting directly to the market."

The company's 20-F for 2018 meets the requirements, but the 2017 report does not, and it must be filed before Braskem can file the 2018 report.

"We'll still be trading on the OTC market, but the process is suspended until the appeal is evaluated and analyzed and decided by the NYSE, which I mean could take some time, Carvalho said. "We have seen a precedent where it took roughly 6 months for that to happen but as far as I know, there is no established time period for that to happen."

If the company files the 20-F while the appeal is under way, Braskem's ADRs would be relisted on the NYSE, he added.

MORE CHALLENGES

The 20-F issue is among several challenges facing Braskem.

The company last week decided to shut its salt mining operations in the state of Alagoas after a study by the Brazil Geological Survey linked those activities to fissures and other geological damage in area neighborhoods. In addition, Braskem will later shut chlor-alkali and ethylene dichloride (EDC) plants in Maceio, the capital city of Alagoas, and is assessing impacts on downstream polyvinyl chloride production in Alagoas and neighboring Bahia, as all are integrated into Braskem's PVC chain.

Salt is used to make brine in the process of manufacturing chlorine that is mixed with ethylene to make EDC, a precursor to PVC. Braskem's Maceio chlor-alkali plant has a capacity of 400,000 mt/year of chlorine and 460,000 mt/year of caustic soda, a byproduct of chlorine production and a key feedstock in alumina and pulp and paper industries.

PVC is a construction staple used to make pipes, window frames, vinyl siding and flooring and other products. A source familiar with company operations said on Monday that Braskem was running its 460,000 mt/year PVC plant in Maceio and its 250,000 mt/year PVC plant in Bahia at reduced rates.

Also,a Brazilian court in April ordered a freeze on up to Real $100 million (US $25.2 million)of Braskem's cash to potentially pay costs associated with the geological damage. Market sources said that amount could rise after the Geological Survey emerged last week linking Braskem's salt extraction operations to the damage, as the freeze was "precautionary" and the lawsuit seeking reparations had sought up to Real $6.7 billion ($1.7 billion). An appellate court later ordered the company to suspend its April 16 dividend payout of Real $2.7 billion ($681 million) until merits of an appeal of the lower court's decision to freeze a smaller amount of Braskem cash had been examined.

--Kristen Hays, kristen.hays@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com