BHP and Vale face clash with lenders as Samarco debt talks collapse

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Australian mining giant BHP’s infamous Samarco iron ore joint venture in Brazil is heading for a showdown with creditors this week following the collapse of the latest round of talks over a proposed debt restructuring.

Samarco, a 50/50 partnership between BHP and Vale in Brazil, has been locked in a years-long dispute with lenders because it was unable to repay billions of dollars after the catastrophic collapse of the Fundao tailings dam in 2015 that killed 19 people, polluted one of Brazil’s largest rivers, and halted production and revenue.

The Fundao dam collapse in 2015 killed 19 people and dumped around 40 million cubic meters of mining waste into communities.Credit:PA

Ahead of a vote on a proposal asking creditors to either accept just a quarter of what is owed to them as part of a payment in 2041 or swap their debt for equity, a coalition of investors representing the two third of Samarco’s $5 billion ($6.8 billion). ) Foreign Debt accused BHP, Vale and Samarco of sticking to “unreasonable assumptions and intransigence” in their latest negotiations.

“Despite minor changes in the most recent versions of the plan, the attitude remains all the more disappointing from two of the world’s largest and most successful companies, which have proven unable to take their share of responsibility,” said a spokesperson for the ad hoc group of financial institutions including asset managers York, Ashmore, Canyon, Maple Rock and Solus.

“During the last round of negotiations, Samarco shareholders presented depressed financial projections that are detached from reality – failing to recognize the current and projected levels of iron ore prices set by investors and producers in a global market. liquid.”

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The breakdown of talks over the weekend raises the prospect of the group of creditors mounting a bid for an alternative restructuring plan for Samarco that would include the appointment of a new group of controlling shareholders and the installation of former Vale CFO Tito Martins as chairman.

“With the support of Tito Martins, one of the most renowned specialists in the global mining market, the group is working at an accelerated pace to develop an alternative plan, to be presented within the legal deadlines,” said the door. -word.

“We believe that Samarco has enormous potential to generate better results for all its stakeholders, while scrupulously respecting its social, governance and environmental responsibilities.”

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