Samarco, BHP's 50:50 joint venture with Vale, said the filing would not impact the fulfillment of the reparation commitments made since the fatal failure of its Fundao tailings dam in 2015, which killed 19 people and caused widespread environmental damage.
"Samarco's JR filling is a last-resort response to multiple legal actions filed by certain Samarco financial creditors in the US and Brazil which have resulted in freezing orders against Samarco's accounts and which threaten Samarco's operations," BHP said.
Samarco restarted reduced operations in December and was expected to produce 7-8 million tonnes per year of iron ore pellets.
It had produced almost 25Mt in 2015 prior to the November dam disaster.
Reuters described the JR request as roughly analogous to a Chapter 11 bankruptcy filing in the US.
"The JR establishes an organised environment to protect Samarco's assets and to restructure the high level of indebtedness in its capital structure," Vale said.
It said a large amount of Samarco's financial debt with non-related parties of around US$4.7 billion, without any guarantee from the shareholders, was incurred prior to the dam failure.
"Samarco also has financial debt in relation to cash needs to support its working capital, Renova obligations, reparation works, and investments for operational resumption, which, since August 2016, have been supported by credit lines made available by its shareholders Vale and BHP Brasil, totalling US$ 4.1 billion as of March 2021," Vale said.
It said negotiations with certain creditors for a consensual restructuring had slowed in early 2019 after changes to dam regulations in Brazil - following the deadly dam disaster at Vale's Brumadinho operations which killed 270 people - which forced Samarco to review its operating model, resumption plan and business plan.
"Given the refusal of creditors to temporarily suspend the legal actions during a new round of out-of-court negotiations, despite Samarco's willingness, the company decided to file the JR in order to preserve its operational continuity and ability to meet its commitments," Vale said.
It said Samarco's debt incurred through bonds and export prepayment contracts was now largely held by investors active in the distressed assets market after being acquired from the original creditors.
