Samarco Mineracao needs ‘major course correction,’ creditors say

By Sarah Lizee

Olympia, Wash., July 12 – An informal group of holders of Samarco Mineracao SA’s funded debt said it has concerns about the company’s intentions for its Brazilian restructuring proceedings and its Chapter 15 case, according to a statement filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

“It has now been exactly three months since Samarco commenced the Brazilian [restructuring] proceeding,” the group said.

“Remarkably, Samarco and the shareholders still have not resumed restructuring negotiations with creditors after unilaterally cutting off discussions approximately two-and-a-half years ago.”

The group said that at the May 13 recognition hearing, the court stated that “a restructuring process works much better when there is actually dialogue between the debtor and its significant creditor constituents.”

No substantive engagement followed the hearing, however.

“Samarco even elected to disregard the court’s urging ‘to reach out to the ad hoc group ... substantially in advance of the June 2 plan filing deadline to provide them with information about the terms of the proposed plan,’” the group added.

The group said it has concerns about some recent developments, including that the restructuring plan filed June 10 doesn’t reflect any input from Samarco’s third-party creditors.

It also said it is concerned about the company’s proposed R$1.18 billion insider debtor-in-possession financing.

“Among other things, the request for approval of the insider DIP was filed without any evidence of a need for financing or an explanation of the proposed use of proceeds,” the group said.

“This is particularly concerning in light of Samarco’s parallel efforts to use the [restructuring] plan to insulate the shareholders from environmental remediation obligations.”

The group said that while it remains optimistic that a consensual restructuring is still achievable, the company will need to undergo “a major course correction” for that to occur.

Samarco is a Belo Horizonte, Brazil-based mining and iron ore company. The company filed Chapter 15 bankruptcy on April 19 under case number 21-10754.

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