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Report: Samarco holds off debt restructuring on uncertainty over liabilities

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Report: Samarco holds off debt restructuring on uncertainty over liabilities

Samarco Mineração SA, a joint venture between Vale SA and BHP Group, is postponing talks to restructure debt of US$3.8 billion to at least November, Bloomberg News reported May 23, citing three unnamed sources.

The creditors agreed to the delay amid uncertainty around liabilities and fines the joint venture may be subject to, the sources said in the newswire's report. Two of the sources said the consortium will not get a clear idea on the liabilities until the end of October, with talks possibly resuming earlier if circumstances change.

According to the Bloomberg News report, talks between creditors and Samarco started in November, with the joint venture to assume the fees for all the parties involved. In January, However, a fatal tailings dam burst at Vale's Feijao iron ore mine in Brazil — deemed worse than the 2015 burst at the Samarco mine — stalled talks.

Vale CFO Luciano Siani Pires, in a conference call with analysts, said operations at the Samarco mine may resume by mid- to late-2020, pending the clearance of legal hurdles to regain the license.

In the wake of the development, value for Samarco's US$1 billion in 4.125% notes due 2022, as well as its 5.75% bonds due 2023, fell to 71 cents on the dollar and 74 cents on the dollar, respectively.

A report by The Sydney Morning Herald revealed that the top management of BHP and Vale were repeatedly warned of dam risks at the Samarco iron ore joint venture in Brazil several years before it burst in 2015.