Vale, BHP propose US$238 DIP financing for Samarco miner – court document

RIO DE JANEIRO, BRAZIL – (REUTERS) Bankrupt miner Samarco Mineraçao SA plans to receive a R$1.2 billion (US$238 million) debtor-in-possession (DIP) loan extended by its controlling shareholders, Vale SA and BHP Group Ltd, to maintain its activity, according to court documents reviewed by Reuters.

But a group representing 80% of Samarco’s debt, excluding Vale and BHP, opposes the move, saying the DIP financing goal would be to protect Vale and BHP assets.

Samarco would pay an annual interest rate of 9.5% and be able to generate enough cash to meet its obligations, the document showed.

Samarco filed for bankruptcy protection in April to prevent creditors’ claims from affecting operations that resumed in 2020, more than five years after a tailings dam collapsed, causing one of Brazil’s worst environmental accidents.

In an email to Reuters, Samarco said the financing proposed by Vale and BHP was essential “for the maintenance of its operations, jobs, payment of its suppliers, while defraying its cash needs.”

The creditors’ opposition, Samarco said, would undermine its recovery and its ability to repair the damage caused by the dam collapse.

Vale and BHP, in separate emails, said loans made in recent years were aimed at allowing resumption of Samarco’s operations so that it could fulfill its obligations.

Vale said the creditors mentioned in the court documents were mostly funds that purchased Samarco debt at reduced prices after the collapse and never contributed any funding toward the company’s recovery.

Samarco on June 10 proposed a plan to restructure R$50 billion ($10 billion) in debt with an offer of preferred shares or a cash payout in 2041 equal to 15% of the current value of holdings.

Samarco’s debt with Vale and BHP totals R$23 billion, while bondholders are owed the equivalent of R$26 billion.

The collapse of a dam at the Samarco mine complex in 2015 killed 19 people and severely polluted the Doce River with mining waste. The company has been the focus of significant litigation from bondholders holding nearly US$5 billion in debt.

Samarco restarted operations in December with the resumption of one of its three concentrators for processing iron ore at the Germano complex, located in Mariana, and one of four pellet plants at the Ubu complex in Anchieta, with a production capacity of 7 to 8 million iron ore pellets.