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February 24, 2022

BHP-Vale JV Samarco unveils new debt restructuring plan

The firm will offer creditors either an inflation-linked bond with a 75% haircut, maturing in 2041, or a debt-for-equity swap.

Brazilian mining firm Samarco Mineracao has come up with a new restructuring plan for its $5bn debt related to the Samarco dam disaster to secure creditors’ support, reported Reuters.

Jointly owned by BHP Group and Vale, Samarco filed for bankruptcy protection in April 2021, to avert possible claims from creditors from impacting its operations.

The bankrupt miner was burdened with borrowings as a result of a dam collapse in 2015 at the Samarco mine in the state of Minas Gerais, Brazil.

This accident led to the deaths of 19 people while severely polluting the Doce River with waste from the mine.

The firm now plans to offer two options to creditors: an inflation-linked bond with a 75% haircut, which will mature in 2041; or a debt-for-equity swap, reported Bloomberg.

In December, the firm announced a proposal to convert all debt into equity. It also proposed to allow creditors to reach more than 15% stake.

Samarco is currently planning a $2.4bn payments cap for repairs from the 2015 disaster to Renova Foundation, reported Reuters citing sources with knowledge of the matter.

The foundation was formed in 2016 through an agreement between BHP, Vale, Samarco and the Brazilian authorities.

Shareholders Vale and BHP will fund the remaining expenses.

Creditors, however, are demanding full payment in new bonds that are guaranteed by shareholders Vale and BHP, according to documents in the bankruptcy proceedings.

Earlier this month, Vale signed a 20-year production agreement with Samarco. This is expected to add $5.1bn in net revenues by 2042.

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