Court ratifies Samarco judicial reorganisation plan, says BHP

4th September 2023 By: Mariaan Webb - Creamer Media Senior Deputy Editor Online

Court ratifies Samarco judicial reorganisation plan, says BHP

An image of Samarco resettlement activities

The judicial reorganisation plan of the Samarco joint venture (JV) in Brazil has been approved, paving the way for the organisation to move ahead with its debt restructuring plan, diversified miner BHP reported on Monday.

In terms of the plan, Samarco’s existing financial debt of $4.8-billion will be exchanged for up to $3.7-billion of long-term unsecured debt, enabling the JV to establish a stable financial position to rebuild its operations after the 2015 dam collapse that killed 19 people.

Samarco, which is jointly owned by BHP and Vale, struggled for years to reach an agreement with creditors. The ratification by the Second Business Court of Belo Horizonte in Minas Gerais, which followed support by a majority of financial creditors, would allow Samarco to enter into definitive debt restructure agreements with creditors.

BHP said that Samarco would complete payments to employees and suppliers, as well as issue new unsecured debt to its financial creditors in the first half of 2024.

The judicial reorganisation plan would not impact the Renova Foundation's ability to continue to implement the remediation and compensation programmes under the framework agreement, the diversified miner noted.

The agreement entered into between Samarco, Vale and BHP Brasil and the Brazil government, the states of Espirito Santo and Minas Gerais, and certain other public authorities in March 2016 established the Renova Foundation to implement environmental and socio-economic programmes to remediate and provide compensation for damage caused by the Samarco dam failure.  

Samarco will continue to have primary responsibility to fund the Renova Foundation and each of Vale and BHP will continue to have secondary responsibility to fund 50% of the Renova Foundation if Samarco does not meet its funding obligations under the framework agreement. 

Under the terms of the judicial reorganisation plan, Samarco's funding of the Renova Foundation will be capped at $1-billion for 2024 to 2030. BHP and Vale will be required to provide funding to the Renova Foundation during this period to the extent that the funding amount required exceeds the $1-billion cap.