Samarco Says Cash Is Enough to Pay Debt at Least Through 2017

  • CFO Eduardo Bahia says company hasn't breached any covenants
  • Payments in next two years are low, 2018 `a challenge'

Samarco Mineracao SA says it has enough cash to cover debt payments for at least two years without having to renegotiate or raise more money while it acts to rebuild its business after two dams burst, causing Brazil’s biggest environmental disaster to date.

The company’s $1 billion in bonds due 2022 have slumped 42 percent since Nov. 5 to 48.5 cents on the dollar as the company faces a 10 billion reais ($2.62 billion) civil lawsuit as compensation for environmental damages. The company’s debt amortizations are low in 2016 and in 2017, while 2018 remains a challenge, according to Chief Financial Officer Eduardo Bahia.

He held a conference call Thursday in an attempt to reassure analysts and investors that the mining company, a joint venture owned by Vale SA and BHP Billiton Ltd, is working hard to avoid a breach of its covenants and doesn’t expect one in the foreseeable future. He added that insurance claims will cover part of the costs stemming from the incident.

"We have a positive cash position to support the company for a good period of time and also fulfill all requirements from the loans until we resume production again," CFO Bahia said.

The spill on Nov. 5 buried a village in Minas Gerais state, killed at least 11 people and contaminated the Doce River, leaving more than 260,000 without fresh water. Federal police in the state of Minas Gerais are conducting an inquiry into possible environmental crimes and Samarco is setting aside about $260 million to fund emergency measures including prevention, remediation and compensation for the environmental and social effects of the incident, the executive said in the call.

The total cost of Samarco’s dam collapse could reach 30 billion reais ($8 billion), and will be used as an example to set future insurance requirements for miners, Leonardo Quintao, who presented the original mining bill in 2013, said by telephone.

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