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Moody's downgrades Samarco Mineração on risk of debt default


Essential Metals & Mining Insights – February 2021


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Essential Metals & Mining Insights - January 2021

Moody's downgrades Samarco Mineração on risk of debt default

Moody's downgraded Samarco Mineração SA's corporate family rating and ofits senior unsecured notes due 2022, 2023 and 2024 to C, from Caa2.

The ratings outlook of the and iron ore joint venturewas changed to no outlook, from negative.

Moody's said July 21 that it expects Samarco to soon suspenddebt and interest payments, or start debt restructuring, unless the company isable to resume operations and start generating cash again.

"That would constitute defaults as per Moody'sdefinitions," the rating agency noted.

Samarco is not in a position to meet its financialobligations due until the end of the year, and there is no confirmation ofadditional support from BHP or Vale other than their on the environmentalremediation of areas affected by the dam burst at the Samarco mine in Brazil.

"An upward rating consideration would require Samarcoto resume production, or find alternatives that could avoid a liquidityshortfall, including formal support from shareholders," Moody's wrote.

In mid-July, Fitch Ratings Samarco's long-term foreign-and local-currency issuer default ratings as well as its senior unsecured debtratings to C from CCC, based on the assumption that it will not be able torestart operations by the second half of 2017.

Earlier during the month, S&P Global Ratings Samarco to CCC fromB, on the same rationale.

S&P Global Ratingsand SNL Metals and Mining are both owned by S&P Global Inc.