Samarco Mineracao on Wednesday presented a new debt restructuring arrangement that hopes to gain the support of creditors during a meeting on March 10 and help remove the Brazilian iron ore miner from bankruptcy.
Creditors of Vale SA and BHP Group's joint venture were expected to vote on Wednesday on the latest recommendations to restructure around $5 billion in debt.
According to Samarco, the meeting had been rescheduled due to a lack of quorum. A final vote will now be held until March 10, the day before the restructuring deadline, irrespective of the number of creditors present.
State authorities in Minas Gerais predict they will begin discussing total amounts by next month.
According to sources with knowledge of the issue, a new plan would reduce the amount Samarco would have to pay to the Renova Foundation at $2.4 billion. Any additional cost would be funded by Vale and BHP.
Samarco, however, is still looking to pay bondholders just 25% on their holdings, offering bonds that will mature in 2041. According to documents in the bankruptcy proceeding, creditors are demanding payment in full, with an increase interest, in new bonds guaranteed by Vale and BHP.
The miner improved a bit the proposal for bondholders interested in converting their debt into equity.
In December, the company proposed converting all debt into equity and permitting creditors to acquire an interest of over 15%.
Under the new proposal, creditors who participate in an anticipated capital increase of $1.4 billion may be compensated in part with other debt instruments. However, Samarco does not offer debt guaranteed by shareholders as requested by creditors.
It is yet to be revealed whether or not these changes will win creditors.
Vale and Samarco have signed a 20-year production agreement that is expected to generate $5.1 billion in net income by 2042 and to advance its iron ore production objective.
If Samarco's creditors reject the proposal, a Brazilian law allows them to devise alternatives.
In that case, Simon Duncombe, vice-president of Brazil Non-Operated Joint Ventures at BHP, said Vale and BHP would demand the right to vote in an assembly of creditors, which includes asset managers York, Ashmore, Canyon, Maple Rock, and Solus.
Bondholders in Samarco are represented by law firms Padis Mattar Advogados, Davis Polk, and Ferro, as well as Castro Neves. Houlihan Lokey is a well-known business.
JPMorgan Chase, Vale by Moelis, and BHP by Rothschild represent Samarco.