Vale-BHP JV Samarco's financial creditors plan to take over the company
NEW YORK - An alternate restructuring plan for Samarco Mineracao SA, a joint venture between Vale and BHP Group, proposes that financial creditors take control of the company.
The plan filed by a group of bondholders is expected to replace Samarco's debt restructuring proposal, which was rejected last month.
The bondholders group, which includes asset managers such as Oaktree Capital, Silver Point Capital, GoldenTree Asset Management and Solus Alternative Asset Management, expects most of the $4-billion debt to be converted into equity.
Renato Franco, founder of restructuring firm Integra Associados, which is advising creditors, estimates creditors will hold around 90% of the company after the restructuring.
Shareholders Vale and BHP are expected to ask the bankruptcy court for the right to vote on the plan. If their vote is not allowed, the creditors' plan could be easily approved.
Creditors are proposing to bring forward deadlines to ramp-up production and accelerate cash flow generation. The plan has a target of doubling iron ore production by 2024, to 14-million tonnes annually, and reach full capacity at 28 million tonnes annually by 2026. The shareholders plan expected this volume to be reached by 2029.
Tito Martins, a former Vale executive that advises Samarco creditors and may become the company's chairman, said investments in safer mining technology would allow a faster production ramp-up.
Samarco went bankrupt as it dealt with the fallout of its 2015 dam burst in the city of Mariana, in Minas Gerais state, that killed 19 people and caused extensive environmental damage. The company resumed production last year.
After improving cash flow, advisors to creditors, Integra Associados and investment bank Houlihan Lokey may look to sell the company to a strategic investor, Martins added.
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