Samarco Mineraç ã o Bonds Plummet After Missed Interest Payment
September 27 2016 - 2:50PM
Dow Jones News
RIO DE JANEIRO—Troubled Brazilian mining company Samarco Mineraç
ã o SA's publicly traded bonds plummeted to eight-month lows on
Tuesday after it missed an interest payment on $500 million in
bonds.
Bank of New York Mellon, the trustee on the debt, said that
Samarco had missed the payment to bondholders Monday but added that
the company is still in the 30-day grace period for payment. A
spokeswoman for the bank declined to comment further. Samarco
declined to comment.
The price of Samarco's 10-year bond, due 2024, was recently down
6.2% at 32 cents on the dollar Tuesday, its lowest level since
January. Analysts noted that Samarco is also scheduled to make
coupon payments in October and November for bonds due in 2023 and
2022.
"We expect both bonds not to pay their coupon," said Cedric
Rimaud, director of emerging markets research at bond research firm
Gimme Credit. "A restructuring is becoming necessary."
Samarco, a joint-venture between Brazilian mining giant Vale SA
and Australia's BHP Billiton Ltd., has had virtually no cash flow
since last November, when a tailings dam at its iron-ore operation
collapsed. The failing at the Fundã o dam is believed to be
Brazil's worst-ever environmental disaster and one of the worst in
the history of mining, with 19 people killed as waste from the
collapsed dam destroyed villages and polluted more than 400 miles
of waterways.
The company's bonds have seesawed in the nearly 11 months since
the disaster, with Samarco struggling to find a path forward after
its environmental licenses were revoked and production halted at
its mines. Bonds have plunged as low as 31 cents on the dollar in
January and risen as high as 62 cents after the company and its
shareholders reached a tentative settlement with Brazil's
government in March.
Two months later, federal prosecutors filed a civil lawsuit
against the mining companies in which they alleged 155 billion
reais ($48 billion) in damages, triggering another selloff. The
prosecutors also sought to nullify the previous settlement, which a
judge suspended in July, raising the prospect of a drawn-out
litigation process.
Vale and BHP Billiton have agreed to support Samarco in its
efforts to fix the environmental and social devastation left by the
avalanche of mud from its tailings dam. But since the parent
companies don't guarantee Samarco's debt, they have no obligation
to its bondholders.
The major question facing the bondholders now is whether Samarco
will ever be allowed to operate again, and if so, when. Vale and
BHP, which initially predicted Samarco's mines to restart by the
end of this year, have more recently demurred from providing
specific time frames.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
September 27, 2016 14:35 ET (18:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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