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Why several firms could be interested in buying Brazil's Samarco

  • Friday, June 24, 2022
  • Source:ferro-alloys.com

  • Keywords:market, mining industry,mine,ferrochrome
[Fellow]The successful attempt of a group of bondholders to assume control of Brazil’s Samarco Mineração could trigger the interest of several companies to buy the iron ore pellet producer.

【Ferro-alloys.com】:The successful attempt of a group of bondholders to assume control of Brazil’s Samarco Mineração could trigger the interest of several companies to buy the iron ore pellet producer.

Brazilian steelmaker CSN recently confirmed that it hired a financial adviser to come up with an offer that it will make to Samarco's controllers and bondholders. Market observers expect other offers to emerge if a creditor group of bondholders manages to take control of the firm.

"In my view, for CSN or any other interested party to assume Samarco, it is necessary for creditors to remove the current controlling shareholders of the company. If that happens, many interested parties will emerge," José Carlos Martins, a former deputy chairman of Samarco and founder of Neelix Consulting Mining & Metals, told BNamericas.

Samarco, which is jointly controlled by mining giants Vale and BHP, has been under bankruptcy protection since last year to delay payments to some bondholders in order to preserve its cash flow and advance toward resuming full production. Both firms have said they have no intention to sell Samarco.

Samarco has presented four proposals to restructure a debt load of nearly 50bn reais (US$9.70bn) and was seeking a 75% haircut, which was rejected by most creditors. Of the total debt Vale and BHP hold 24bn reais, while bondholders are owed the remainder.

A group of bondholders are instead seeking to convert their debt into shares and assume control of Samarco.

A total of 17 creditors, including asset managers GoldenTree Asset Management, Solus Alternative Asset Management and Oaktree Capital, hired Tito Martins, a veteran mining executive, to develop the alternative plan that they filed with a court.

In a recent interview with BNamericas, the executive confirmed the interest of the bondholders to sell Samarco in the future.

"The funds will seek alternatives to divest the company in the future. This would happen either through the sale to a strategic partner or through an offering of Samarco shares on the stock exchange," he said.

Samarco is considered a company with high operational and production capacity.

The financial difficulties it faces stem from a tailings dam-related tragedy. The company halted operations from late 2015 until December 2020, after its Fundão tailings dam collapsed, destroying two villages, killing 19 people and causing widespread environmental damage.

Last year, it produced 7.87Mt of iron ore pellets, 26% of its 30Mt/y capacity. With the gradual resumption of operations, Samarco is expected to see strong cash-flow generation in the coming years.

  • [Editor:Alakay]

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