Samarco Mineracao SA, a bankrupt joint venture between Brazilian miner Vale SA (VALE3.SA) and BHP Group Ltd (BHP.AX), proposed on Thursday a plan to restructure 50 billion reais ($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, sources said.
Samarco filed for bankruptcy protection in April to prevent creditors’ claims from affecting operations that restarted at the end of 2020, more than five years after a tailings dam collapsed causing one of Brazil’s worst environmental accidents.
The ‘haircut’ plan proposes discounts of 85% on the amount to be paid to the company’s largest creditors who do not accept preferred shares in the mining company, people with direct knowledge of the plan told Reuters. They spoke on the condition of anonymity because they were not authorized to discuss the matter with media.
To the main group of creditors, which includes bondholders, shareholders and suppliers, the company proposed converting the amounts owed into preferred shares entitled to special dividends, according to the sources.
If creditors do not accept preferred shares, they may choose to receive payment in cash in 2041 at the 85% discount, but adjusted for inflation, the sources said. Currently, the mining company is privately held, with only common shares.
The company confirmed to Reuters its approval of the restructuring plan, but not the details.
Samarco’s debt with Vale and BHP totals 23 billion reais, while bondholders are owed the equivalent of 26 billion reais. Debt to large and medium-sized suppliers is about 310 million reais.
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 $5 billion in debt.
The company proposed the full payment of debts to employees, totaling about 10 million reais, within 30 days after the plan’s approval, the sources said.
To another group that includes small and medium-sized suppliers, the company also proposed the full payment of approximately 11 million reais in debts, within 30 days after approval, for amounts up to 50,000 reais, and within 180 days for larger debts, the sources said.
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 between 7-8 million iron ore pellets.