Samarco in Restructuring of Notes and Prepetition Pre-export Finance Facilities

December 1, 2023

Cleary Gottlieb represented Samarco Mineração S.A. – Em Recuperação Judicial (Samarco), a privately held Brazilian mining company that was born out of a joint venture controlled in equal parts by Vale S.A. (Vale) and BHP Billiton Brasil Ltda. (BHP), in the restructuring of 5.375% notes due 2024, 5.75% notes due 2023, and 4.125% notes due 2022, and its prepetition pre-export finance facilities.

The restructuring comprised of the exchange of Samarco’s old notes and prepetition pre-export finance facilities for new 9% senior notes due 2031 issued on December 1, 2023, and follows execution of a certain restructuring support agreement (RSA) between Samarco, its shareholders, and members of an ad hoc group of financial creditors; confirmation of a consensual judicial reorganization (RJ) plan by the Bankruptcy and Reorganization Court in Belo Horizonte, in Brazil; and the Chapter 15 recognition and enforcement in the United States. The RJ plan covers pre-petition claims of approximately $10 billion, including approximately $4.8 billion in financial claims of foreign financial creditors.

In connection with the restructuring, Samarco successfully reduced its debt with such foreign financial creditors from approximately $4.8 billion to approximately $3.7 billion, fulfilling its obligations under the RSA and significant commitments under the RJ plan. In addition, Vale and BHP invested new money in the company, initially in the form of a bridge loan that was converted into approximately $250 million of additional new notes on the issue date. The new notes mature in June 2031, bear interest at varying rates (ranging from 9% to 9.5%) and are unsecured.

In the context of the restructuring, Samarco also preserved in full its commitments with the Brazilian public authorities, following the collapse of Samarco’s Fundão tailings dam in November 2015. Since then, Samarco has been committed to remediate the damages and, in view of the restructuring, will continue to focus on the gradual resumption of its operations.

The Samarco restructuring has presented a series of novel legal issues, including the scope and effect of alternative plans of reorganization under the amendments to the Brazilian bankruptcy law, the obligations, and duties of creditors in rejecting reorganization plans presented by the debtors and the treatment of Samarco’s environmental remediation and reparation obligations and related shareholder contributions following the collapse.