BHP Billiton shares will come under pressure on the ASX this morning after its 50% owned Brazilian iron ore miner, Samarco, missed an interest payment on $US500 million of bonds.
Reuters reported the payment was $US13.5 million and Samarco now has a 30 day grace period to make good the missed payment or investors holding at least 25% of the $US500 million bond could declare the principal due immediately.
That would force the company to repay the full amount, a situation that in turn would pressure BHP and its partner, Vale, to put up the money to secure the repayment, or start a debt restructuring process.
BHP shares eased 1.5% in London overnight after a small dip to $21.50 on the ASX yesterday.
The missed repayment will raise suspicions among some investors that BHP and its Samarco partner, Vale (the giant Brazilian miner) want to put Samarco into bankruptcy protection as a means of limiting liability for Samarco, or start a long debt restructure to slow down the eventual payment of compensation.
Samarco suspended operations in last November following the terrible dam disaster in Brazil that took lives, destroyed towns and farms and has already cost both companies hundreds of millions of dollars.
And the pressure on BHP and Vale (and of course Samarco) will grow from now on.
Reuters points out that Samarco has $US2.2 billion in outstanding bond obligations and about $US1.6 billion of bank loans. It faces about $US54 million in interest payments on three bonds through November.
"We did not receive any money or information today from Samarco," a New York-based spokesman for BoNY Mellon told Reuters in an emailed statement.
Reuters said the price on the bond fell to 33.625 cents on the dollar to yield 24.886% on Monday, from 34.25 cents on Friday. The bond has dropped from about 87 cents in last November, when a tailings dam burst and unleashed a mud flow that killed 19 people, left hundreds homeless and polluted a major river.
Reuters says the missed payment underscores the reluctance of Samarco’s parents to provide the venture with additional funding after agreeing to pay up to 20 billion reais in compensation and fines related to the spill.
After a series of setbacks with regulatory agencies in Brazil, Samarco failed to set a definitive timeframe for resuming operations, which would be crucial to continue debt payments.
Samarco asked bondholders to identify themselves before August 31 to sound their willingness to engage in a potential debt restructuring. On the eve of the interest payment, no offer had materialised, according to one Samarco bondholder who asked for anonymity, according to Reuters.
