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Fitch downgrades Samarco JV on licensing concerns

Fitch Ratings on May 10 downgraded Samarco Mineração SA's long-term foreign- and local-currencyissuer default ratings as well as its senior unsecured debt ratings to CCC fromBB-, based on the assumption that it will not secure the required licenses to by the end ofthe year and will run out of cash to support timely payments to creditors withinthe next five months.

If the company does receive an operatinglicense within the next two months, it would likely lead to material positive ratingsaction, as the rating agency believes that parents BHP Billiton Group and Vale SA would financially aid Samarco if it were able toresume operations before year's end.

Samarco could also secure export financingshould it restart operations, which would further support its working capital positionand debt servicing needs.

Fitch, meanwhile, downgraded the national long-term ratings toCCC(bra) from A(bra) and placed a recovery rating of RR4 to the securities thathave been issued by Samarco.

In addition, Fitch removed the ratings from Negative Watch.