Idea is to meet interests of shareholders – Vale and BHP Billiton – and the company’s creditors, sources say

06/21/2022

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Otávio Honorato/Divulgação Samarco — Foto: Samarco plant in Mariana, Minas Gerais

The Steinbruch family’s CSN group, which aims to become a global iron mining giant, is preparing a plan that may solve the imbroglio that the judicial reorganization of Samarco Mineração has become. The iron ore pellet producer reported more than R$50 billion in debts when it filed for protection from creditors on April 9, 2021.

The idea is to meet the interests of shareholders – Vale and BHP Billiton – and the company’s creditors, sources say. The two sides failed to reach an agreement on the recovery plan drawn up by Samarco and its owners. As a result, it was rejected at the creditors’ meeting on April 18.

CSN hired Ricardo Knoepfelmacher’s consulting firm, which is specialized in corporate restructuring and complex cases involving corporate and creditor disputes like Samarco’s. Any deal between the parties is better than litigation – to where the case is heading if there is no agreement, according to a source.

Preliminary talks have already been made with Samarco’s shareholders and representatives of the financial creditors – 17 foreign distressed funds. Among these are Oaktree, Goldentree, Solus, Monarch and Silverpoint.

The group holds more than R$23 billion in bonds issued by the company. These bonds refer to loans made by Samarco before 2015. These creditors did not agree with the terms of the company’s plan and submitted to the judge an alternative plan, which is being analyzed.

The group’s plan includes, among several points, a capital injection of 38% of the debt in the form of bonds, which removes Vale and BHP from the group that controls the mining company. The plan is referred to as “Nova Samarco” and one goal is to seek, soon after, a strategic investor. In other words, a company that operates in the mining industry. This means an opportunity for CSN.

Vale and BHP supported a second, alternative plan – much less radical than the one from the financial creditors – from two workers’ unions from Minas Gerais and Espírito Santo. Basically, they made some improvements to the recovery plan made by Samarco.

Both plans were submitted on May 17 to the judge in Belo Horizonte in charge of the suit, but according to a source familiar with the case, any ruling could still take 45 to 60 days. A conciliation hearing for shareholders and creditors with the judge has been scheduled for this Tuesday. At the first moment, the meeting is aimed at defining whether there will be mediation, according to information provided to Valor.

CSN has a difficult task ahead – mainly to convince Vale to listen to its proposal. The mining company is unwilling to do so. The others seem more open to listening to what it has to offer. If the funds’ plan is accepted, the two shareholders will be trounced in the clash and will go to court, a source said.

If it succeeds with an attractive proposal, it will be a great opportunity for CSN to take control of Samarco. CSN’s owner, Benjamin Steinbruch, famously avoids entering a business if he will not be able to be the controlling shareholder.

Samarco is in the condition of being again the large producer of iron pellets it was before 2015, when it sank together with the tailings from the collapse of the Fundão dam. The company, which can handle 30 million tonnes a year, resumed operations at the end of 2020 with only 26% of its capacity.

Pellets, as they are known, are a premium product in the international iron ore market.

CSN Mineração, which went public in February 2021 and already produces around 33 million tonnes of fine ore per year, will start making a superfine material known as pellet-feed, which is used as a raw material in the manufacture of pellets. This way, it would integrate its production – as Vale, which has several pellet plants in the country, already does.

BHP and Vale prepared a joint note. “BHP Brasil and Vale inform that Samarco is not for sale and affirm their support for the restructuring plan filed by Samarco’s worker unions and other creditors on May 18. Both shareholders are focused on preparations for the conciliation hearing tomorrow [Tuesday] and on ensuring Samarco’s sustainability and its responsibility to the remediation efforts, which are not addressed by the creditors’ plan.”

Ricardo Knoepfelmacher, CSN and the creditors did not immediately reply to the requests for comment.

*By Ivo Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/