RIO DE JANEIRO (Reuters) – Samarco Mineracao SA, a joint venture between Brazilian miner Vale SA and BHP Group Ltd, has filed for bankruptcy protection to prevent creditor claims from affecting its operations, Vale said in a securities filing Friday.
The collapse of the dam at the Samarco mining complex in 2015 killed 19 people and severely polluted the Doce River with mining waste, one of Brazil’s worst environmental disasters. The facility, which resumed production in December, was the focus of significant litigation from bondholders with nearly $ 5 billion in debt.
“The filing (judicial reorganization) is needed to prevent ongoing legal action … from affecting Samarco’s ability to produce, send, receive for its exports and to fund normal activities,” the company said.
Vale said the filing for bankruptcy protection would not affect Samarco’s ability to pay compensation to those affected by the 2015 dam explosion. It said negotiations outside the court with creditors had slowly failed over time.
The court reorganization request, filed in the state of Minas Gerais, is roughly similar to the United States’ Chapter 11 bankruptcy filing.
Samarco has $ 4.7 billion in financial debt from unrelated parties, Vale said. In the years following the Samarco disaster, Samarco has negotiated with creditors to reach a restructuring agreement. However, those talks slowed down in 2019 following changes to dam regulations in Brazil, which materially affected operations at Samarco, Vale said.
In 2019, another dam exploded at the Vale mine in Brazil, killing some 270 people and prompting tightening of rules governing mining dams.
Most of the debt is now held by “investors active in distressed asset markets,” rather than original bondholders at the time of the disaster, Vale said.
Reporting by Gram Slattery; Edited by Christian Plumb and Will Dunham